Pension Fund Investment in Canada Pension Fund Investment in Canada Trends, Regulation and Pension Governance April 2002 Rio de Janeiro, Brazil Rudy R. Dabideen, CFA

2 Presentation Outline PIAC Pension Assets / Market Regulations Investment Trends Fund / Plan Governance

3 PIAC 200 Plus Members Total Assets of PIAC members Approx $600 Bill Investment Focus 5 Main Committees –Investment –Communications –Member Services –Government Relations –Corporate Governance Web Site: Pension Investment Association of Canada

4 Total Pension Asset Growth Total Pension Assets (US MM) Source: Intersec

5 Top 10 Pension Plans in Canada Cdn $’s Bill Source: Benefits Canada - April 2001 As of Dec 2000

6 Average PIAC Asset Mix Source: PIAC

7 TSE 300 Canadian Equity MSCI WorldGlobal Equity MSCI EAFEInternational Equity SC UniverseCanadian Bonds S&P500 US Equity MSCI JapanJapan Equity Typical Market Indexes

8 Limit on global investments –30% outside of Canada (2001) Statement of Investment Policies & Procedures (SIP&P) Harmonization of “regulators” Pension Benefit Act –Prudent Person Rule Actuarial Valuations –Solvency valuations Regulation

9 Investment Trends Increase in Foreign Investments –Derivatives to go beyond the legal limit –Canada: 2% of World market capitalization Alternative Investments –Private Equity –Hedge Funds

10 Investment Trends Changes to the Canadian Bond index –Corporate bond content of index changed from 13.9% in 1996 to 25.9% at end of 2001 –Increase % of BBB 4.6% of index 17.8% of all corporate bonds –Concentrated on shorter maturities –Higher focus on credit analysis

11 Risk Management –Risk Budgeting Defined Benefit to Defined Contribution Plans Social Investing / Ethical Investing Settlement Improvements T + 1 Investment Trends

12 Fund Governance Pension Plan Governance Model –PIAC / ACPM / OSFI Structure of Pension Plans –Trustee’s Role –Management’s Role –Monitoring –Feedback

13 Plan Governance Enron in USA Nortel & JDS in Canada Ontario Teachers’ Model (Summary from Teachers’ Website) –Fiduciaries report on how they vote shares –Corporations report the results of shareholders vote within 1 day of the annual general meeting –Independent directors on Board –Board should have meetings in absence of management –All press releases based on GAAP earnings –Auditors earn only audit fees

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