Investment results

Market conditions and investment performance

U.S. equities were the best performers in the third quarter of 2018, with the S&P 500 Index up by 5.84% in CAD terms. The FTSE Canada Universe Bond Index was down 0.96%. The Canadian S&P/TSX Composite Index was down 0.57% and the MSCI EAFE Index was down 0.41% during the quarter. The Bank of Canada raised its policy interest rate by 0.25% to 1.50% on July 11, 2018. Within the plan U.S. equities and Infrastructure performed the best. The following table depicts the performance of the Plan’s fund (per cent return.

Asset class Market value
($ millions)
2018
Jul-Sep
(%)
2018
YTD
(%)
2017
Annual
(%)
2016
Annual
(%)
2015
Annual
(%)
2014
Annual
(%)
2013
Annual
(%)
Fixed income
Cash and short-term 209.1 0.4 0.9 0.7 0.7 0.8 1.1 1.0
Bonds 9,988.4 -1.5 0.0 3.4 3.2 3.1 8.3 -2.0
Equities
Canadian equities 3,695.9 0.8 1.8 9.3 21.5 -4.0 11.6 20.3
U.S. equities 3,927.1 5.3 16.3 14.1 6.3 21.8 22.3 44.2
International equities 3,192.7 -2.1 -0.2 25.4 3.7 16.3 3.9 24.0
Real estate, private equity and infrastructure 4,481.4 2.4 9.6 13.1 10.0 16.6 8.3 11.3
Currency overlay 10.6
Total (DB component)* 25,505.1 0.55 3.94 10.42 7.93 7.27 10.86 16.88
Benchmark --- 0.02 2.43 8.59 6.72 5.12 10.99 14.00

*Numbers may not add up due to rounding.

Investment highlights

  • The fund’s third quarter return was 0.55% compared to our benchmark of 0.02%.
  • As at September 30, 2018, the fund held assets of $25.5 billion.
  • The fund had net cash outflows of $45.5 million in the third quarter.
  • We reduced Canadian Equity by $26.0 million, U.S. Equity by $48.5 million and International Equity by $25.0 million.
  • We added $920.9 million, $90.0 million and $12.2 million to Long Bond, Real Return Bond and Private Debt respectively. We withdrew $751.9 million from Universe Bond. In total, $150.6 million was added to fixed income.
  • We withdrew $599.2 million and $50 million from Universe Bond and High Yield respectively. In total, $200.8 million was added to fixed income.
  • In the alternative assets we had net distributions of $39.9 million from real estate, $7.3 million from infrastructure and $49.4 million from private equity during the quarter.

Fund Assets - October 2000 to September 30, 2018

Asset-mix highlights

  • As at September 30, 2018, 60.0% of assets were invested in equities and alternative investments compared to the asset mix target of 56%. This is within the allowable range. This was made up of 14.5% Canadian equities, 15.4% U.S. equities, 12.5% international equities, 10.3% real estate, 3.5% infrastructure and 3.8% private equity.
  • 40.0% of assets were invested in bonds and short-term investments, compared to an asset mix target of 44%. This included 10.3% in real return bonds, 28.9% in nominal bonds and private debt and 0.9% in cash and short-term investments and currency overlay.