June 10, 2011
In a recent internal study, PWL reviewed the latest annual reports of six of the largest Canadian pension managers*. This allowed us to identify the following five common characteristics:
A reader who is familiar with PWL will realize that our portfolio strategy has been aligned with these characteristics for a decade.
Indexing portfolios and basically ignoring hedge funds has allowed us to capture the market’s returns, avoid negative surprises (large losses) and keep investment costs low.
In general, we allocate more than half of our equities to foreign markets, a strategy that produces more stable returns than one of concentrating on Canadian equity.
Investing in Real Estate Investment Trusts (“REITs”) and other similar securities helps produce a higher cash flow.
And finally, hedging currency risks (in part or in full) has also helped stabilize returns.
As a result, PWL portfolios have delivered steady returns relative to the market and have avoided extreme losses. Portfolios have also recovered well from the 2007–2008 financial crisis.
* Canada Pension Plan Investment Board, Caisse de Dépôt et Placement du Québec, Ontario Teachers’ Pension Plan, Ontario Municipal Employee Retirement System, Alberta Investment Management Company, British Columbia Investment Management Corporation.
Chairman of the Investment Committee
and Director of Research
PWL Capital Inc.