Asset mix
As of December 31, 2010, the CAAT Pension Plan has over $5.5 billion in assets that must be invested in a prudent and skillful manner. The asset classes in which the Plan invests are selected based on their suitability to reach the Plan’s return targets within acceptable risk levels.
Our mix of Liability Hedging and Return Enhancing investments is the result of comprehensive studies that take into consideration our liabilities, long term goals and our risk tolerance.
Current Asset Mix
Developing an asset mix that is suitable for the fund is one of the most significant challenges facing the Plan's Board of Trustees. The appropriate mix takes into consideration the Plan's current and future liabilities, as well as the current and expected assets. It has to provide a solid foundation on which to build our investment strategy, yet be flexible enough to weather economic uncertainties.
The Plan's investment portfolio, like that of many pension plans, is a collection of investments spread among various asset classes. Diversity is one of the keys to an effective asset mix and it is achieved within the Plan's broad asset categories: Liability Hedging and Return Enhancing investments. These classifications allow the Plan to better predict how the portfolio will act during different market periods.
The asset mix currently in place is one that the Plan’s Board of Trustees deems appropriate to meet our needs. Since the goal of the Plan is to continue to pay pensions indefinitely, the asset mix is constantly monitored and evaluated to ensure it continues to promote the long-term health of the pension fund.
In 2011, the Plan worked with its actuary to review the asset mix target. The new asset mix, approved by the Board of Trustees in December, can be found below. The main changes made were to add a new allocation to commodities, and to separate out the allocation to emerging market equities.
| Asset Class | Target |
|---|---|
| Liability Hedging | 43% |
| Bonds | 23% |
| Infrastructure | 10% |
| Real Estate | 5% |
| Commodities | 5% |
| Return Enhancing | 57% |
| Canadian equity | 13% |
| Global equity | 29% |
| Emerging markets equity | 10% |
| Private equity | 5% |
Liability hedging investments are generally long-term, stable investments which help to offset sensitivities to inflation and changing interest rates inherent in the Plan's liabilities.
Return enhancing investments have the potential for higher performance than the liability hedging investments, which will help meet the rate of return required by the fund.