www.mercer.ca investment performance report at march 31, 2009 saint mary’s university pension plan...

www.mercer.ca

Investment Performance Reportat March 31, 2009Saint Mary’s University Pension Plan

June 2009

Yvan Breton, Montreal

2Mercer (Canada) Limited

Agenda

Market review – what happened in 2008

Performance review of SMU funds

Active manager issues

Managing risk

www.mercer.ca

Market ReviewWhat happened in 2008


What happened?

Lower quality borrowers were granted mortgages easily

Low quality debt repackaged for resale

Mid-2000s

Many mortgages defaulted

Financial Institutions /Buyers of repackaged low quality debt started reporting huge losses

2007

Financial Institutions having difficulty borrowing at reasonable cost

U.S. Government intervention

Worldwide collapse of confidence

2008

Low Interest RateEnvironment

Sub-PrimeMortgage Crisis

Liquidity Crisis


Market Indices Return As at March 31, 2009 (1-year and 4-year)

-34.0%

-24.1%

-32.4%

4.9%

-4.7%

-6.5%

0.1%

5.3%

-40.0% -35.0% -30.0% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0%

MSCI EAFE $CAN

S&P500 $CAN

S&P/TSX Capped

DEX Universe

1-year 4-year


Market Indices Return As at May 29, 2009 (YTD)

UPDA

TED

-3.2%

-8.6%

17.2%

1.4%

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%

MSCI EAFE $CAN

S&P500 $CAN

S&P/TSX Capped

DEX Universe


Distribution of Market ReturnsHistorical Look at Annual Stock Market Returns

www.mercer.ca

Fund Performance Review


Gross Performance to March 31, 2009Money Market ( Sun Life Financial ) (3.6% of funds)

Period Fund Return Value Added Quartile Ranking

1 year 2.7% +0.3% Q3

2 years 3.7% +0.2% Q2

3 years 3.9% +0.2% Q2

4 years 3.6% +0.1% Q3

5 years 3.3% +0.1% Q4


Gross Performance to March 31, 2009Canadian Equity (Barclays Global Investors) (22.9% of funds)

Period Fund Return¹ Value Added Quartile Ranking

1 year -28.5% +3.9% Q1

2 years -13.7% +2.8% Q1

3 years -5.8% +1.5% Q1

4 years 2.5% +1.9% Q1

5 years 5.1% +2.0% Q1

¹ Benchmark for the Fund is S&P/TSX Equity Index


Gross Performance to March 31, 2009International Equity (Acadian) (15.0% of funds)

Period Fund Return Value Added Quartile Ranking

1 year -41.4% -7.4% Q4

2 years -29.6% -5.3% Q4

Returns below are combination of Acadian and UBS1

3 years -16.5% -4.6% Q4

4 years -9.4% -4.7% Q4

5 years -6.6% -4.0% Q4

¹ The Acadian fund was only used from March 31, 2007 onward. For 3, 4 and 5-year periods, the result shown is a combination of the UBS performance (to March 31, 2007) and Acadian (from April 1, 2007).


Gross Performance to March 31, 2009Index (passive) Funds (bonds: 32.8%; US Equity: 15.9% of funds)

Period Fixed Income US Equity

1 year 4.5% -24.0%

2 years 5.1% -19.9%

3 years 5.2% -10.8%

4 years 5.1% -6.5%

5 years 5.1% -5.6%

www.mercer.ca

Active Managers Issues


Active Managers Issues Downgrade of Barclays Global Investors (BGI)

The BGI Active Canadian Equity strategy was recently downgraded by Mercer

– Reflects our concerns over recent changes to the strategy

Pillar of success for BGI’s Active Canadian Equity strategy has come from its commitment and dedication to research

– According to BGI, 90% of its added value comes from its research

BGI has increased the workload of the Canadian research team to include non-Canadian responsibilities

– We believe this may distract them and cause the strategy to lose its competitive advantage


Active Managers Issues Underperformance at Acadian

Acadian’s international equity strategy has underperformed recently

Acadian uses a quantitative model to rank stocks into quintiles– Historically, the model has been effective and highly ranked stocks

have outperformed lowly ranked stocks

Acadian attributes their recent underperformance to a market dislocation during which stocks of lesser quality (i.e., high debt, poor earnings, high P/E multiples) have been outperforming

When markets become “normal” again, Acadian expects performance to improve

Mercer continues to rate this strategy highly and believe it has above-average prospects for outperformance

www.mercer.ca

Managing Risk


Risk/Return of Investment Options Offered

Risk Return Spectrum

(1) Short term risk is defined as volatility of returns and account balance(2) Long term risk is defined as inadequate long term real returns to reach retirement objectives

Long-Term Risk Spectrum (2)

Short-Term Risk Spectrum (1)

MoneyMarket

5-YearGICs

Bond Balanced Portfolios

USEquity

InternationalEquity

Canadian Equity


Basic Concepts of Sound Investments Asset Diversification

Diversification by:– Type of investments (stocks, bonds, short-term

investments, etc...)– Geography

Risk reduction without necessarily impeding expected return

Also need to counter the long term effect of inflation


Tools Offered under the SMU Plan

Five target risk asset allocation portfolios

Sun Life Tools– Risk assessment questionnaire– Retirement planning tools– www.sunlife.ca/member

Risk tolerance will likely change over your career– Check your risk tolerance periodically and make changes as you

deem appropriate– If not using a target risk portfolio, periodically check to see whether

you need to re-balance your allocation back to your target

http://www.sunlife.ca/member


Notices and risk warnings

© 2009 Mercer LLC. All rights reserved. This document may contain confidential and proprietary information of Mercer and is intended for your sole use. The document, and any opinions on or ratings of investment products it may contain, may not be modified, sold, or otherwise provided, in whole or in part, to any other person or entity without Mercer's written permission. This document may contain information on investment management firms that has been obtained from those investment management firms and other sources. Mercer research documents and opinions on investment products (including product ratings) are based on information that has been obtained from the investment management firms and other sources. Mercer gives no representations or warranties as to the accuracy of such information, and accepts no responsibility or liability (including for indirect, consequential or incidental damages) for any error, omission or inaccuracy in such information other than in relation to information which Mercer would be expected to have verified based on generally accepted industry practices. Any opinions on or ratings of investment products contained in this document are not intended to convey any guarantees as to the future investment performance of these products. In addition: Past performance cannot be relied upon as a guide to future performance. The value of stocks and shares, including unit trusts, can go down as well as up and you may not get back the

amount you have invested. The value of bonds, and other fixed income investments including unit trusts can go down as well as up and you

may not get back the amount you have invested. Investments denominated in a foreign currency will fluctuate with the value of the currency. For the information of the readers of this document, and to meet our own stringent conflict of interest guidelines, we advise that Mercer provides consulting services to many companies in the financial services industry and we may have provided services to the companies discussed in this document (or a parent or related company). Mercer's Manager Performance Analytics software is also available to companies for a fee and the companies discussed in this document (or a parent or related company) may be subscribers to this product. Our comments in this document are based upon our internal research relating to the companies and factual information obtained through our discussions with the companies. The comments are intended to present objective guidance based upon those facts.

www.mercer.ca

www.mercer.ca investment performance report at march 31, 2009 saint mary’s university pension plan...

Documents