Constant innovation may serve the Toronto Transit Commission (TTC) well, but consistency has helped the TTC Pension Fund Society through recent market challenges.

Ranked No. 47 in Benefits Canada’s Top 100 Pension Fund Report, the society “firmly stuck to its knitting” during the downturn, a strategy that helped it rebound from 15.5% losses in 2008 to 13.6% gains in 2009, and a 10.8% gain last year, says John Cannell, the society’s chief operating officer.

Before the meltdown, the fund implemented an asset overlay program to rebalance its holdings when the market pushed them too far off the benchmark. “With the 2008 crash, we resisted the temptation to stay out of equities and directed [our advisors] to continue the overlay program, thus moving our equity holdings back to benchmark,” he says.

Staying the course has worked well, but that doesn’t mean that change is out of the question for the fund—whose members include 12,584 active TTC, Amalgamated Transit Union and Greyhound Lines employees and 6,300 pensioners.

At present, the society is looking to different asset classes for a possible new direction.

“We made little change in 2010, but we’re in the process of investigating various new asset classes,” Cannell says. “We’ve been into infrastructure for a couple of years. We’ve been into real estate for a couple of years. But we have not done private equity yet.”

Looking for more
Despite a “satisfactory” performance over the past year, the fund still faces challenges: right now, it has a simultaneous solvency shortfall and a going-concern surplus of roughly $100 million. The shortfall might mean higher contributions—of approximately $50 million—for the commission and fund members over a 10-year period. At present, the society is asking for a solvency funding exemption from provincial regulators.

Yet another switch could help. The plan earned new status as a jointly sponsored pension plan (JSPP) in June, a move that could bolster its case for exemption, since an exemption has already been granted to other JSPPs such as OMERS and the Ontario Teachers’ Pension Plan.

That shift won’t mean major changes for members, says Cannell. Along with actuarial funding, “The setting of contribution rates will be removed from the collective bargaining process,” he says. “Those are really the main differences.”

And, despite the payoff of a tried-and-true approach, the fund’s asset mix may look different in the coming year as the society revisits allocations. “We’ll be looking at a complete re-examination of our asset allocations, so we’ll be doing an asset liability study in the not too distant future,” he says.

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