Vestcor Investment Management Corp. returned 11.76 per cent in 2019, with total assets under management rising to $18.5 billion, according to its 2019 annual report.
The organization, which manages the investment and administration for several of New Brunswick’s public sector pension plans, said the long-term annualized gross pension fund return since it began its business continues to beat both client return and risk management funding requirements of 7.21 per cent.
“Our clients depend on us to provide well-diversified portfolio strategies that meet their specific funding objectives in a risk-controlled fashion,” said John Sinclair, Vestcor’s president and chief executive officer, in a press release. “We also recognize that 2020 has been a much more challenging investment environment and we look forward to these strategies continuing to help our clients meet their long-term investment goals during more volatile market conditions.”
Vestcor’s fixed income portfolio performed well in 2019, noted the report, with nominal bonds returning 6.87 per cent, followed by corporate bonds (8.03 per cent), real return bonds (8.31 per cent), long-term bonds (10.46 per cent) and international high yield (14.52 per cent).
“Although corporate bonds trailed their benchmark due to the requirement to maintain more highly liquid positions to facilitate client demand in the strategy, most of Vestcor’s fixed income portfolios outperformed their benchmarks as a group due to strong security selection, market timing and risk management decisions by the portfolio management team throughout the year,” said the report.
In terms of public equity, the organization’s low-volatility portfolios performed well versus their benchmarks, outperforming in the Canadian (24.96 per cent), international (11.42 per cent) and emerging markets (6.1 per cent) regions. However, the U.S. underperformed its benchmark, at 19.87 per cent, due to the underperformance of valuation-based signals in the U.S. market during recent years, according to the report.
And in alternative investments, returns were mostly strong for the year, with real estate and infrastructure returning 12.5 per cent and 12.4 per cent, respectively. On the other hand, private equity, at 5.28 per cent, was significantly lower than the benchmark of 19.2 per cent.
“The private equity portfolio is diversified across geography, sector and currency and investments are made through a combination of commitments to external funds, co-investments alongside fund managers and direct internally managed investments,” said the report. “In 2019, the portfolio produced positive returns but was unable to match the strong performance of its public equity benchmark.”
The report also noted that Vestcor’s administration services team processed more than 7,000 pension and employee benefits applications in 2019, with a significant increase in the purchase of service and termination applications, at 13 per cent and 21 per cent over 2018, respectively.
The organization also replaced its legacy pension and employee benefits administration system with a new modernized system, which included a new pension payroll system. This step removed the responsibility from the government of New Brunswick and Vestcor said moving the service in-house will provide efficiencies and cost-saving opportunities in the long term.
“We were very pleased to have been able to seamlessly implement a new internally managed pension payroll process for our clients’ retirees effective Jan. 1, 2020,” said Sinclair.