The Nova Scotia Public Service Superannuation Plan posted a 5.33 per cent return for the 2018/19 fiscal year, with $335 million in total investment income, according to its annual report.
Net of investment management fees, the plan’s rate of return was 5.13 per cent. Measured both ways, the returns slightly underperformed the plan’s benchmark rate of 5.35 per cent. The fund also slightly underperformed last year, posting a gross return of 5.77 per cent.
Overall, the plan’s assets reached more than $6.54 billion, up from $6.35 billion at the end of the 2017/18 fiscal year.
The plan’s asset mix remained close to benchmark, noted the report. The past year was volatile for financial markets, particularly in the fourth quarter of 2018 when global public equities took a tumble, said Ronald Smith, chair of the fund’s trustees, in the report. “The asset mix of the Public Service Superannuation Fund is intended to reduce risk during turbulent periods. The asset mix met this objective in 2018-2019.”
In its investment performance analysis, the trustees found strong active performance from the plan’s international equity managers and real asset portfolios were offset by hedge funds’ performance in relation to their benchmark.
As well, the report noted the plan upped its stake in private assets over the past year, through new investment opportunities in its real assets portfolio of real estate, infrastructure and agriculture, as well as private equity.
And it’s planning to further increase its exposure to real assets, setting a target of 28 per cent of its portfolio, up from its current 23.21 per cent. The plan is also aiming to cut its total equity investments to 25 per cent of the portfolio, from 29 per cent currently.
Inching away from equities in favour of a higher allocation to private assets and absolute return strategies is intended to further reduce fund volatility and protect to the downside as financial markets experience stress, the report noted.
As part of its sustainable investing program, the plan intends to evolve its corporate engagement work and identify ways to monitor and improve the resiliency of its real assets as climate risk continues to be a significant concern.
As of March 31, 2019, the plan was 101.9 per cent funded on a market-value basis, down from a 103.4 per cent funded ratio last year. The PSSP’s net assets available for benefits were $6.54 billion, up from $6.35 billion in 2018, an increase of $189 million.
In 2019/20, the plan will review its funded heath for the five-year period between Jan. 1, 2021 and Dec. 31, 2025. The review will determine the plan’s long-term financial health, ability to afford cost of living adjustments, appropriateness of contribution rates and the benefits structure for active plan members’ future benefits.