Performance
2019 Performance Overview

During 2019, the Plan achieved a return on invested assets of 14.4% gross of investment management fees (13.9% net of investment management fees).

These return figures only reflect the Plan’s invested assets and do not incorporate the $1.8 billion promissory note received from the Government of Newfoundland and Labrador. The promissory note bears interest at a rate of 6% per annum and is a further fixed income investment of the Plan. Through the pension reform process, a primary objective of the establishment of the promissory note was to stabilize the Plan’s returns.

When combined with the Plan's invested assets, the inclusion of the promissory note results in a total return for 2019 of 11.5% gross of investment management fees (11.2% net of investment management fees).

Although the impact of the promissory note had a dampening effect in 2019, the opposite was true in 2018 (e.g. the return on invested assets was 0.9% gross of investment management fees, while the total return including the impact of the promissory note was 2.6% gross of investment management fees), which illustrates the benefit of the promissory note in certain market conditions.

Total invested assets reached approximately $3.8 billion at December 31, 2019, an increase of approximately $0.4 billion over the December 31, 2018 balance of approximately $3.4 billion.

Benchmarks

In addition to comparing performance against the Plan’s assumed actuarial discount rate of 6%, the TPPC also compares its performance against relative benchmarks on a total-fund and individual asset class basis. This benchmarking process is critical as it allows TPPC Management, members of the Investment Committee and Board of Directors to evaluate the effectiveness of the Plan’s investment strategy and implementation. TPPC’s benchmarks are approved by TPPC’s Board of Directors.

On a total-fund basis and for each asset class, the Fund seeks to outperform the benchmark rates of return, and this outperformance is described as “value-add”. A discussion of the Plan’s performance will always be anchored back to a comparison to the assumed actuarial discount rate and the Plan’s established policy benchmarks.

The following summarizes the Plan’s benchmarks by asset class:

Asset Class Benchmark
Equities
Canadian equity S&P / TSX Composite
Global equity MSCI ACWI C$
Emerging market equity MSCI Emerging Markets C$
Private equity 9.0% (net) / MSCI ACWI C$ + 3.0%
Real Assets
Real estate CPI + 4.0%
Infrastructure CPI + 5.0%
Fixed Income
Universe bonds FTSE Canada Universe Bond
Corporate bonds FTSE Canada Short Corporate Bond
Mortages FTSE Canada Short Corporate Bond + 150 basis points
Private debt 8.0% (net)

The Plan’s return for 2019 on invested asset of 14.4% exceeded the Plan’s policy benchmark of 13.7%, representing a value-added return of 0.7%.

For 2018, the Plan’s policy benchmark was -0.01% which reflected a value-added return of 0.9%.

The value-added return stems from the active management undertaken by the Plan’s investment managers.