As reported in the September newsletter, the UBC Faculty Pension Plan Board approved the termination of one of the two active global equity managers, JP Morgan, and the hiring of a new global equity manager, Arrowstreet Capital. The assets were transferred to Arrowstreet on October 27, 2017.
The change was made because JP Morgan had been underperforming their return performance benchmark. The new manager, Arrowstreet, was hired on the expectation that their returns will achieve sufficient value added over their benchmark to more than offset the increase in fees. JP Morgan had been providing a “discounted” fee to the Plan as a consequence of their underperformance.
When the Trustees are assessing changes to either the asset mix or investment managers within the fund options, the amount of fees are always part of the analysis. Investment fees may increase at times but this will be a reflection of where it is believed there are higher expected returns and/or lower risk to more than offset any incremental fee increases.
The Balanced Fund fee has increased 2 basis points to 47 basis points, and the Foreign Equity Fund fee has increased 9 basis points to 57 basis points as a result of this change in managers. Fees may decrease over time as most active manager’s fee schedules are such that the more assets they manage for the Faculty Pension Plan, the lower the fees charged are in percentage terms. The relatively large size of the Faculty Pension Plan (over $2.2 billion) allows for very competitive fees for the various fund options available to our members.