In 2022, we began implementing changes to the strategic asset mix for the FPP Balanced Fund as well as reshaping the Plan’s fixed income investments. These changes provide a slight reduction in the overall risk level while increasing potential expected returns for both the UBC FPP Balanced and Bond Funds. We are providing another update so that you are informed about how these changes may affect your investments. Past updates can be found in the last section below.
The UBC FPP Balanced Fund is almost at the target allocation
With the movement of assets nearly complete, we are close to achieving the target allocation. Final completion is expected in the first half of 2023, when the remaining assets have been transferred to CBRE, one of our new global infrastructure investment managers. The asset transfer to Brookfield, the other new global infrastructure investment manager, was completed in 2022.
Recent market conditions have kept the allocation to bonds a bit lower (and real estate a bit higher) than prescribed. All allocations are within policy boundaries, but will soon be rebalanced even closer to the target mix. The table below illustrates the actual versus target asset mix for the FPP Balanced Fund.
Balanced Fund Actual Asset Mix as of December 31, 2022 vs. Target Asset Mix
Changes to the Bond Fund have been completed
In the last newsletter, we let you know that the fixed income investments in both the Balanced and the Bond Funds were being reshaped. In the summer of 2022, this was completed.
The newly constructed fixed income component is now only actively managed and the strategies chosen are designed to complement each other. Compared to the broad bond market, this combination has the potential to lower overall portfolio risk and increase expected return over a full business cycle. However, it is important to note that there may be periods over which the new fixed income program will perform more poorly than the broad bond market.
Impact on fees
Since the transitions to new investment managers are mostly completed, the investment management fees increased in 2022 for the UBC FPP Balanced Fund by 0.11% and for the UBC FPP Bond Fund by 0.19%.
The Board carefully considers the impact on fees when they make decisions about the Plan’s investments. While fees do matter, it is important to focus on the investment return net of all fees. These changes were made to improve the expected future net returns of the Plan’s Balanced Fund and the Bond 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.
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