bcIMC Up 16.3% in 2009-2010

Via Pension Pulse.

Living
in Montreal, I tend to focus way too much on Quebec and Ontario based
funds. I was skimming through BC Investment Management Corporation's (bcIMC) website today and saw they posted their 2009-2010 Annual Report.

bcIMC
doesn't get a lot of press coverage but they're one of the largest
public pension funds in Canada and have performed well over the long-run
sticking to sound principles. I briefly covered their 2008-2009 results
last year in my post on cleaning up pension funds, and mentioned the following:

How
did it perform in 2008-2009? From the annual report, we see that they
lost 14.6% in 2008-2009 relative to their benchmark of -11.1%. In other
words, they underperformed their benchmark by 3.5%, which is
considerable, but their overall results are among the best of the large
funds. Interestingly, bcIMC which is known to be "less sophisticated'
than its counterparts in Canada, managed to lose a lot less than most of
them and its senior managers didn't get paid anywhere near as well as
most of their counterparts out east (not that they got paid badly
either after losing billions).

Just like PSPIB and CPPIB, which I recently compared in terms of their FY 2010 results, bcIMC's fiscal year ends on March 31st.

So how did bcIMC perform in 2009-2010? Doug pearce, bcIMC's President & CEO went over the results in his message in the 2009-2010 Annual Report (p. 14):

The
last decade has been very challenging from an investment perspective.
For the 10 years ending March 31, 2010, bcIMC’s combined pension return
was 4.6 per cent on an annualized basis. Despite this challenging market
environment, I am pleased that bcIMC’s activities contributed $979
million in additional value over our clients’ combined benchmark of 4.3
per cent, net of all investment management fees.

In looking
specifically at the investment returns for 2009-2010, clients benefitted
in the shorter term from a stronger than expected recovery in capital
markets. The one-year annual return net
of fees, for our combined pensions was 16.3 per cent. While clients had
solid results, bcIMC unfortunately did not meet our clients’ combined
benchmark of 17.3 per cent. Although many of our public equities, fixed
income and mortgage funds outperformed their benchmarks, our real estate
portfolio detracted from the returns. Declines in real estate
valuations typically lag publicly traded investments and the 2009-2010
economic downturn drove property valuations lower, even though income
levels (rents) were fairly stable and vacancy rates remained low. I am
not concerned; real estate is a long-term asset and we have a sound
portfolio of quality properties that over a 15-year period, has exceeded
its benchmark by 4.1 percentage points. We anticipate that it will take
another year for the value of the portfolio to recover.

This
past year saw a number of highlights beyond the investment returns. We
introduced the Active Global Equity Fund and the Global Government Bond
Fund, and expanded our currency hedging program to include the euro.
These product offerings will provide clients with greater exposure to
global markets while providing opportunities to manage currency
fluctuations.

We maintained our ongoing commitment to responsible
investing by participating in industry-related initiatives such as the
Mercer’s Climate Change and Asset Allocation study and the Prince of
Wales’ P8 Group Climate Solutions Investments Made to Date project. We
also endorsed the Institutional Limited Partners Association’s (ILPA)
Private Equity Principles that addresses governance practices and
transparency within the private equity sector. Instituting our new
Mortgage Risk Rating system was another noteworthy initiative;
properties with energy conservation initiatives will be identified and
rewarded with a more favourable credit risk rating.

As shown in the table below, Private Placements and Real Estate underperformed their benchmarks (click on image to enlarge):

Again, as I mentioned last year, their benchmark for Private Placements
is a tough one to beat, much tougher than most other comparable funds.
And I am not sure a spread over a Canadian small cap index is
appropriate given that the portfolio is invested in large buyouts around
the world.

And
even though the 2009-2010 results didn't beat the combined benchmark of
17.3%, they were better than CPPIB's return of 14.9% for FY 2010, but
worse than PSPIB's return of 21.5% for FY2010. The latter fund
outperformed in fiscal year 2010 because of Private Equity and
Infrastructure, but its FY 2009 results were much worse than CPPIB and
bcIMC's results.

[Note: CPPIB's Policy Benchmark
was 20.8% in FY 2010, PSPIB's was 19.8%, both of which were higher than
bcIMC's 17.3% for its Policy Portfolio. Relative weightings in equities
explain this difference.]

And as far as compensation, bcIMC's senior officers aren't compensated
anywhere near the levels of their counterparts in Eastern Canada (click on image
to enlarge):

I find it laughable that the media in Vancouver harps on the compensation of Doug Pearce,
without comparing his total comp, or that of other senior officers, to
their counterparts in Eastern Canada. And again, keep in mind this is one of the
largest and best run public pension funds in Canada. Look at the total
comp of their senior officers - nothing to scoff at, but nowhere near
what they'd be making in Toronto (and Vancouver is the most expensive
city in Canada in terms of housing).

Finally, if you take the time to carefully read bcIMC's 2009-2010 Annual Report,
you'll see they are completely transparent, presenting all their
benchmarks and objectives clearly, and the report is a pure pleasure to
read. A layperson can read it and make sense of it. For me, bcIMC sets
the bar in terms of reporting. And here's the kicker: they even ask
their members and the general public to fill out a survey
and provide feedback on their annual report. Kudos to them, they keep
it simple as they deliver the long-term results their members are
looking for.

Comments

[doomandbloom]

thought you would like this Leo.

Solar-Power Industry Hits Magic Number

http://www.cnbc.com/id/38446145

[Ardent Spirits]

I wish CalPers was like this fund. All sorts of rustlings & scurryings in the bushes. Lots of quid pro quo's but no firm evidence can be found. Anything but transparent & under constant attack by Schwarzenegger & his rich cronies.