The C$41 billion ($38 billion) Public Sector Pension Investment Board plans to bring more assets in house in a bid to lower costs, and will increase the number of direct investments to increase control, the chair Paul Cantor said at the annual public meeting.
Cantor said managing assets internally represented substantial savings when compared to having external portfolio managers manage assets.
“If we outsourced all of PSP Investments’ asset management to outside fund managers, it would cost an additional $135 million in management fees per year, after taking into account the savings in salaries and benefits,” he said.
In addition to bringing more assets in house it plans to increase the proportion of internal active management in public markets and implement a “value opportunity investing strategy”.
The fund is increasingly bringing functions in house with the development of a new internal function for asset-liability modelling one such example.
According to Cantor, speaking at the meeting, one of the key corporate objectives for fiscal year 2010 is to define a policy portfolio, within an asset-liability framework, taking into account the liabilities of the plans and optimising the policy portfolio structure. As well as develop internal asset-liability capabilities and a model.
For the first six months of the 2010 financial year the PSP recorded a return of 15 per cent.
The fund has a target policy of investing 62 per cent world equity (with about 30 per cent in domestic equities), 15 per cent in nominal fixed income, and 23 per cent in real return assets, which includes world inflation-linked bonds, real estate and infrastructure.
PSP Investments also has a new product committee such that any new investment or financial instruments may need to be reviewed by the committee and approved by management. That list then goes to the investment committee on an annual basis.
PSIP Investments continues to undergo an enterprise risk management initiative that began in 2008, and has completed a strategic investment-related process to identify, prioritise and review appropriate recommendations to mitigate risk.
