The UBC Faculty Pension Plan (FPP) Board of Trustees recently approved a change in the asset mix of the FPP Balanced Fund option. This change is the result of research performed earlier this year, which concluded that increasing “real” assets (i.e. real estate and infrastructure) would lead to an improvement in the expected risk/return metrics of the Balanced Fund.
Following this research, the Board conducted an in-depth review of the Plan’s ability to invest in real assets. As a result of this review and the aforementioned research, the Board decided to complement the current real estate allocations with an allocation to direct global infrastructure. These assets are direct, private market investments (not publicly traded).
The Balanced Fund’s real estate allocation is managed by three managers: BentallGreenOak (domestic), CBRE Global Investors (U.S.), and UBS Asset Management (global). The new global infrastructure mandate will be managed by two managers. The manager search has been completed and the chosen firms will be named once all documentation has been completed.
The following table shows the current and revised allocations for the Balanced Fund. The new 8% allocation to infrastructure will be added by reducing the Fund’s Canadian equity exposure as well as slightly reducing its allocation to real estate. Note that the global equity exposure is slightly increasing and the total bond allocation is slightly decreasing.
| Balanced Fund | Current Allocation | New Allocation |
|---|---|---|
| Bonds | 40% | 37% |
| Canadian Equity | 15% | 10% |
| Global Equity | 30% | 33% |
| Real Estate Domestic United States Global |
15% 5% 5% 5% |
12% 4% 4% 4% |
| Infrastructure Global Infrastructure |
0% 0% |
8% 8% |
| Total | 100% | 100% |
The transitions to the new managers will take 12 to 18 months. Once the transitions have been completed, the investment management fees of the Balanced Fund are expected to increase. While fees matter, it is the investment return net of all fees that is important and these changes are being made to improve the expected future net returns of the Balanced Fund. For current fee information, sign in to your member account at mysunlife.ca/ubcfpp, then under Investments, select Manage plan > my plan > Plan overview > Account fees.
The Balanced Fund’s Bond component is being reviewed and there may be a change in managers for this part of the portfolio. This review should be completed in early 2022. Details will be communicated at that time.