The asset-liability strategy is updated every three years. The 2019 study reviewed the 2015 strategy and proposed an updated asset-liability strategy, which was approved by the Board of Directors in late 2019.
The study concluded that the Plan was heading in the right direction with a disciplined approach to de-risking and utilizing the asset mix glide path. The updated asset-liability strategy continues to ensure that the Plan’s asset mix better matches its liabilities that its interest rate risk is reduced over time.
The strategy ensures that the Plan continues to move along a glide path, or a series of phases, whereby asset mix changes occur when a predetermined funded status is reached. The asset mix glide path has more equities in each phase, which could bode well should we be going into a low-return environment. This will improve the liquidity of the Plan.
The strategy uses a more robust proxy for the Plan’s liabilities and better represents the expected returns and volatilities. As a recap, since 2015, the Plan has increased bond holdings and extended bond durations. This has led to a better match of assets to liabilities. Additional investments in alternative investment holdings continue to be made gradually to reduce the volatility of returns. The long bond, inflation-linked bond and alternative assets allocations have been increased, while universe bonds and equity allocations have been reduced. The adoption of the strategy has reduced the Plan’s funded status volatility.
The Plan’s investment objectives are to select the appropriate asset mix and risk level to achieve returns above the benchmark and meet the Plan’s long-term funding needs.
Sound investment decisions contribute to the sustainability and affordability of the Plan and support Canada Post as it fulfills the promise to Plan members of providing pension benefits at a reasonable cost.
In the long term, the Plan’s record of outperformance relative to its benchmark portfolio has continued. The Plan’s benchmark portfolio represents the performance of the market index for each of the asset classes in the Plan. Over 10 years, the Plan’s average annual return was 8.8%, meaning the Plan outperformed its benchmark of 7.8% and its return objective over time of 6.5%. Over the short term, the Plan relies on a benchmark portfolio to evaluate investment performance.
The Plan’s benchmark portfolio represents the performance of the market index for each of the asset classes in the Plan.
The Plan's actual asset mix as at December 31, 2020, compared to the benchmark target allocation is shown in the following chart. At any given time, the asset mix may vary from the long-term targets. The SIPP-DB has minimum and maximum limits to allow for flexibility as market conditions change.