Vestcor Returns 7.5% For 2023
Vestcor Corp. is reporting a 7.5 per cent return for 2023, despite the challenges of rising inflation and high interest rates.
The New Brunswick-based investment organization achieved five- and 10-year annualized returns of 6.27 per cent and 6.73 per cent, respectively. In a press release, Vestcor noted these returns ensure its clients continue meeting their funding objectives, even through the period of higher inflation indexing requirements of the past few years.
“We are pleased that Vestcor continues to assist our clients with meeting their long-term objectives during an uncertain and variable period in both global financial markets and our operating environment” said John A. Sinclair, president and chief executive officer at Vector, in the release. “Our lower risk approach should continue to help our client’s meet their long-term objectives on behalf of their members.”
The investment organization also recently released its second annual responsible investment report, which found carbon emissions of Vestcor’s overall investment portfolio had declined by roughly 10 per cent in 2023. The report also noted the investment organization has expanded its carbon emissions measurement coverage to a much larger proportion of assets under management.
Last week, Vestcor issued a press release stating it persists in meeting clients' long-term investment and operation objectives:
Fredericton, NB – Atlantic Canada’s largest investment firm once again successfully supported clients in meeting their long-term investment and operational objectives. Vestcor Inc. (Vestcor), an independent not-for-profit company based in Fredericton, NB, offers global investment management and pension and benefit administration services to several public sector entities.
High inflation and interest rates, coupled with uncertain equity markets, made for a challenging beginning to 2023 for most pension plans. As the year progressed, inflation concerns eased, but market volatility remained strong. Notwithstanding these challenges, Vestcor achieved a 7.50% total fund return for the year, on behalf of its clients, contributing to 5-year and 10-year annualized returns of 6.27% and 6.73%, respectively. These returns ensure clients continue meeting their funding objectives, even through the period of higher inflation indexing requirements of the past few years.
Vestcor’s shared risk and target benefit clients require a lower risk approach than most typical pension plans. The lower risk design of shared risk and target benefit plans means Vestcor, and its clients, expect returns to be lower than those of riskier designed plans during times of positive market results, but are also expected to be better protected in years of negative returns. This was confirmed in 2022, an excessively challenging year for financial markets, when Vestcor achieved overall pension fund returns of -3.63% on behalf of its clients, while several Canadian defined benefit pension plans had median returns of -10.3%, as reported by RBC Investor Services (RBCIS). As the markets strengthened in 2023, the median return for these same Canadian defined benefit pension plans in 2023 was positive at 9.1%1, while Vestcor’s lower risk returns compared as expected at 7.50%. In addition, Vestcor’s longer-term 4-year annualized pension fund return of 4.94% compares very favourably to the corresponding annualized return of 4.21% as reported by RBCIS, with much lower risk.
In addition to Vestcor’s persistently effective results, clients continue to benefit from the organization’s cost-efficient, not-for-profit model. The investment management expense ratio remained at 0.14% in 2023, or 14 cents per $100 of average net assets, well below the average expense ratio of most investment management alternatives.
Vestcor’s administration service team also performed well amidst continued growth in transactional processing volumes and member enquiries. Regardless of the growing workload, the team met the demands, exceeding most client KPIs and responding to over 36,000 member inquiries. In addition, educational opportunities for pension plan members were expanded, with more to be provided this year. The administration service team recognizes the importance of retirement preparedness and supports its clients in helping better prepare their members in relation to their specific pension plans.
“We are pleased that Vestcor continues to assist our clients with meeting their long-term objectives during an uncertain and variable period in both global financial markets and our operating environment” said John A. Sinclair, President and Chief Executive Officer. “Our lower risk approach should continue to help our client’s meet their long-term objectives on behalf of their members.”
Finally, 2023 saw the launch of Vestcor’s second annual Responsible Investment Report, and an important retirement announcement amongst the senior leadership.
The Responsible Investment Report provided two key enhancements; it significantly enhanced Vestcor’s carbon emissions measurement coverage to a much larger proportion of assets under management, and the carbon emissions of the overall investment portfolio measured in the prior year had declined by approximately ten percent. The Report, available at vestcor.org/responsibleinvestment, also speaks to the organization’s leadership in and commitment to providing clients with risk management services and tools that assist in developing sustainable long-term investment programs that meet their objectives.
In addition, John A. Sinclair, Vestcor’s President and Chief Executive Officer, announced his plans to retire after 20+ years at the helm of the organization. Sean Hewitt, CFA, ICD.D, has since been appointed as the organization’s President and CEO, effective April 15, 2024.
The organization’s 2023 Annual Report, including financial statements, will be published in June. Further information about Vestcor is available online at vestcor.org.
1 RBC Investor Services, Canadian Defined Benefit Plans for period ending December 31, 2023.
ABOUT VESTCOR
A Partner in Creating and Delivering Sustainable Financial Security.
Vestcor is an independent not-for-profit company located in Fredericton, New Brunswick which provides global investment management services to 11 different public sector client groups representing $20.9 billion in assets under management as of December 31, 2023, and administration services to 11 public sector pension plans and 4 employee benefit plans.
Vestcor’s team of more than 150 service professionals provides innovative, integrated, cost-effective investment management and pension and benefit administration services solutions to public sector entities. Vestcor currently services the requirements of approximately 111,000 pension plan members, 42,000 employee benefits members and 150 participating employer groups. Further information about Vestcor is available at vestcor.org.
In early February, I discussed why Vestcor named TTC's Sean Hewitt as its CEO.
Sean started his new job this week and I didn't reach out to him or CIO Jon Spinney to discuss these results.
The annual report for 2023 has yet to be released but when it is in June, you'll find it here.
The results are in line with what other larger pension plans I cover posted and not surprising to me as Vestcor performed well without taking the same equity risk of its peer group made up of DB plans in the RBC Investor Services (RBCIS).
Vestcor reminds me a lot of CAAT Pension Plan, it's an independent not-for-profit company focusing on managing the pension plans of its members (administration and asset management).
Both organizations have a similar asset mix and they are both managed extremely well.
In fact, I'd like to see all of Atlantic Canada's pension plans managed by Vestcor, I think it would give them more clout and more exposure and they can easily manage the growth/ amalgamation.
You can learn more about Vestcor's activities by reading my coverage of their 2022 results here.
Below, I refer you to the New Brunswick Public Service Pension Plan's Annual Information Meeting that took place on September 19, 2023 in Fredericton, NB.
Fast forward to minute 29 to listen carefully to John Sinclair's comments, well worth it.
I'd like to wish John a happy retirement as he did a wonderful job for many years at the helm of Vestcor and once again wish Sean Hewitt all the best as he takes over the top job there.
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