Asset Mix

Our investment strategy is based on an asset mix policy that will allow us to meet or exceed the long-term return requirements with an acceptable level of risk. In determining the asset mix policy for the Fund we identify the asset classes that collectively are most likely to meet our pension obligations within the Plan’s risk tolerance. We weigh the risk/reward profile of each asset class to ensure that we are reasonably compensated for risk and we invest in different asset classes and geographic markets to disperse risk and reduce the volatility of total returns. We invest domestically and internationally in interest bearing investments, real return bonds, public equities, private equities, infrastructure and real estate assets, often in combination with conservative use of derivative financial instruments which are exchange traded and backed by other investment assets. We use derivative financial instruments to give us exposure to equity markets and manage our asset mix.

During 2007, the asset mix strategy was reviewed and the AC Board approved an increase in the Fund’s target exposure to infrastructure investments by 5 per cent with a corresponding decrease in interest bearing investments. This increased the long-term asset mix target for private markets from 37.5 per cent to 42.5 per cent and decreased the target for public market investments from 62.5 per cent to 57.5 per cent. The Plan’s asset mix policy is supported by foreign currency management, derivatives and absolute return strategies.

Over the long term, investment returns on the Plan’s assets are expected to fund approximately 70 cents of every dollar paid in benefits with the balance coming from employee and employer contributions.

Long-term asset mix targets