Over the years, the York University pension plan has performed well by all objective measures and made major changes to its asset allocation.
Speaking at the Canadian Investment Review’s Plan Sponsor Exchange conference in February, Guy Burry, chair of the university’s pension investment committee, credited these accomplishments to the committee’s encouragement of diverse thinking instead of going with the herd.
The pension plan, which is available to all faculty and staff, was valued at $2.9 billion and had a strong annual return of 16.7 per cent at the end of 2019. The hybrid plan is primarily defined contribution, with a minimum guarantee. “There are no investment options. We have one investment pool.”
Since investment returns are very important to benefits payments, the plan’s policy decisions have to consider the multiple risk profiles of its members, Burry said.
From a governance perspective, the university’s pension investment committee makes recommendations, approves manager mandates, monitors investments and reports to a pension fund board of trustees, which is responsible for administering the fund. It also has a board of governors, which is the legal administrator of the plan. “The board of governors has an investment committee for the endowment fund and for treasury, but it’s abdicated the investments for the pension plan to a pension fund board of trustees.”
The trustees, which are a representative group, are very diverse in all facets, said Burry, noting 50 per cent are female. “We have pipefitters and electricians all the way through to people that teach finance and fix nuclear reactors.”
Members of the sub-committee on investment performance, where most of the heavy lifting is done, are all volunteers, he said, and it’s his job to recruit the right kind of people to sit at the table.
“We’ve spent a lot of time making sure we don’t have groupthink and we’ve got good diversity of thought [and a] good diversity of experience.”
From an investment perspective, the plan has 50 per cent in global equity, 10 per cent in infrastructure, 10 per cent in real estate, 10 per cent in global bonds and 20 per cent in Canadian bonds, said Burry, noting this asset allocation has been in place for just over a year. “It took us a long time to get there through that governance process.”
However, over the years, the plan has made many changes — it introduced global equity in 2007, infrastructure in 2008 and real estate in 2015. And the fund is currently considering thematic exposures in all asset classes, he added.
“We’ve never been at the bleeding edge in any of the changes we’ve made. We have been at the leading edge. We don’t want to be first, but we certainly want to be a close second.”
Burry also noted the portfolio is managed for downside protection and has performed well over the years, especially considering the committee is made up of volunteers. “Our performance over any period you want to pick for the last 10 years is top decile, which I’m told takes us out of it being lucky.”
He credits this to collaboration and having the right people around the table. In addition, the plan doesn’t shy away from people on the committee who don’t agree with the majority; instead, it keeps people with divergent thinking on the committee.
It’s also key to ensure everyone on the board understands their role as a fiduciary, Burry said. When members say they’re at the table representing faculty, they must be reminded that isn’t the case — they’re at the table because they’re a fiduciary. “And if you do it every time it starts to become embedded into the behaviour.”