[Originally published on October 6, 2020]
As the pandemic continues to run its course, we would like to assure you that the Management and the Board of Trustees for the UBC Faculty Pension Plan (FPP) continue to conduct ongoing due diligence of the investment options available to you. Discussions regarding the longer-term strategic positioning of the Plan’s balanced funds and overall investment options are also ongoing.
Since our last update, the Board completed a detailed review of the Statement of Investment Policy and Goals, which includes a Statement of Investment Objectives and Beliefs. Both reviews are performed on a regular basis, however this review was conducted under a markedly different market environment, with elevated risks to economic growth and the inflation outlook going forward.
Also, during the summer months, the Board conducted an in-depth review of the FPP Balanced Fund’s real estate allocation. As a result of this review, and guided by a desire to manage risk within the Fund, one of the current Real Estate managers will be replaced. The Board also decided to move forward with a more detailed review of all asset classes ahead of the regular review scheduled for 2022-23. The intention is to carefully consider the resilience of the FPP under different economic scenarios. Ongoing dialogue with the FPP’s fund managers has given us confidence that their actions during this unprecedented period are in line with their mandates and that they are taking measures to ensure successful business continuity during the economic downturn and the work-from-home model that many firms have implemented.
On a regular basis, the Board reviews and manages the balanced fund asset class weights relative to the funds’ long-term targets. The Board also monitors the changes that members make, in aggregate, between available funds. Despite the higher levels of market volatility brought about by the pandemic, there was no need to rebalance the balanced funds, and member intra-fund transfers were not excessive during this period.
We do not plan on making any near-term adjustments to the fund options, or the asset mix of the multi-asset class funds. We believe it is prudent to stay disciplined and follow our long-term investment policy, with a caveat that adjustments may be made once the aforementioned reviews are completed.
The market environment is still very fluid. Volatility remains elevated, and markets are reacting to news on the spread of the virus, new combative measures taken by governments globally, different forms of stimulus provided by central banks and fiscal authorities, and geopolitical events. In mid-September, it was reported that U.S. equity funds experienced the largest weekly flow reversal in history, as aggressive buying – primarily into the shares of popular tech companies – was followed shortly thereafter by panic selling as the markets sharply reversed course. Overreacting to short term news flow can cost you valuable progress towards your retirement goals. We encourage you to review the Market Commentary section for detailed investment market updates.
Live Webcast on December 3: Investment Update for FPP Members
Join us for an investment update presentation on Thursday, December 3, 2020 at 10 a.m. over Zoom video conferencing. Learn more and register for the webcast.