INVESTMENT COMMITTEE INVESTMENT COMMITTEE UPDATEUPDATE

INVESTMENT COMMITTEE INVESTMENT COMMITTEE UPDATEUPDATE

NPP BOARD OF DIRECTORS

24 January 2011

MGen Bob Bertrand, CMADG Fin Mgmt/COMMITTEE CHAIR

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Current Investment Policy approved by NPP BoD in May 2006) new investment policy and transition to an external investment manager selected

CIBC was selected through a competitive process in Jan 2007

$130M of CFCF assets transferred in Apr 07 Investment Committee membership in 2010:

Chair – MGen Bob Bertrand (DG Fin Mgmt) 2 External Members: Mr. Jim Frank and Mr. Stephen Cotsman SA/VCDS Rep: Col Tammy Harris ECS Reps:

CAS GO (BGen Neville Russell) CLS RSM (CWO Giovanni Moretti)

Ex-officio – DGPFSS CFO (Shirley Tang-Jassemi)

BackgroundBackground

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Long term asset mix policyLong term asset mix policy

Most critical element is the long term asset mix policy defined by the Benchmark Portfolio (“market neutral position” in the current policy)

Determines the risk/return profile of the Fund by defining the long term asset mix and acceptable deviation

Most of the level and variance of a portfolio’s return can be explained by the asset mix

Should be determined taking into account objectives, risk tolerance, market expectation

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Fixed incomeMortgages

Bond risk rating at BBB

20% Foreign holdings not limited to U.S.

Canadian Corporate bond holdings limit at 40%

Private investments authorized with approval of

Investment Committee

Investment PolicyInvestment Policy

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Canadian EquitiesClearer definition of sector limits

Real estate authorized through REITs

Private investments authorized with approval of Investment Committee

No minimum market capitalization for individual investments (max of 25% in companies under $1B)

Investment Policy (Cont’d)Investment Policy (Cont’d)

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Investment Policy (Cont’d)Investment Policy (Cont’d)

Foreign Equities U.S. and International managed as a single group Emerging market investments authorized with

approval of investment committee

Specific performance objectives established for each asset class if an active investment style is selected

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No change over the last year A real rate of return of four percent over a four-year moving period

Achieve 1.25% added-value on a four year moving period as

follows:

o Cash and Bonds (DEX Universe): 0.25%

o Canadian Equity (S&P/TSX Composite): 1.50%

o Foreign Equity (MSCI World Ex-Canada in Cdn$): 1.50%

o Asset Class Mix: 0.25%

Investment Policy Asset Class Weights

o Cash & Bonds: 40% (Range: 30% - 50%)

o Canadian Equity: 30% (Range: 20% - 40%)

o Foreign Equity: 30% (Range: 20% - 40%)

Performance ObjectivesPerformance Objectives

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CFCF Performance Revenues and ExpensesCFCF Performance Revenues and Expenses

 

FY 09/10 FY 10-11 YTD Nov 10

TOTAL

Investment Interest/Dividends 4,138,505 1,651,893 5,790,398

Realized Gains/(Losses) (2,839,914) 1,218,049 (1,621,864)

Available Revenue 1,298,592 2,869,942 4,168,534

Unrealized Gains/(Losses) 20,653,164 2,233,202 22,886,366

Currency Gains/(Losses) 0 0 0

Total Revenue 21,951,756 5,103,144 27,054,900

Custodial Fees 48,262 29,164 77,426

Management Fees 185,752 121,081 306,833

Total Expenses 234,014 150,245 384,259

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CFCF Performance (Under CIBC Management)CFCF Performance (Under CIBC Management)

Quarter ending

Dec 2010

Jan 2010 to

Dec 2010

May 2007

to

Dec 2010

Added Value

PPs

May 07 to

Dec 10

Target

Total Portfolio 3.47% 8.71% 1.89% 0.33

1.25 Portfolio Benchmark 4.11% 9.78% 1.56%

Cash and Bonds (Index Plus) -0.49% 7.44% 5.99% 0.18

0.25 DEX Universe Bond Index -0.71% 6.74% 5.81%

Canadian Equities (Active Value) 8.42% 14.96% 2.33% -0.71

1.50 S&P/TSX Composite Index 9.45% 17.61% 3.04%

US Equities (Index) 7.36% 8.57% -5.68% -0.63

1.50 S&P 500 Index (Cdn$) 6.97% 9.35% -5.05%

International Equities (Active Value) 0.43% 0.68% -3.11% 3.53

1.50 MSCI World ex Canada Index (Cdn $) 5.36% 5.49% -6.64%

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CFCF Performance (Under CIBC Management)CFCF Performance (Under CIBC Management)

Period CPI Change (%)

CFCF Target (Inflation + 4pps) (%)

CFCF Performance

(%)

May 07 – Apr 08 2.1 6.1 -1.2

May 08 – Apr 09 2.1 6.1 -11.9

May 09- Apr 10 0.5 4.5 13.8

May - Nov 10* 2.0 6.0 7.3

Average 1.5 5.5 3.1

Investment policy aims at 4.0% real return

At the end of November 2010: 1.6% real return

Market crash explains

* May – Nov 2010 is an approximation

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Determine investment asset mix that will match CFCF returns to the return liabilities (return options) as selected by the contributors to CFCF

Revisit Committee’s Terms of Reference and Investment Policy as required

Develop consultation process on withdrawals for real estate investments purpose

Develop advice on CFCF withdrawal amounts while sustaining purchasing power

Future WorkFuture Work

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Questions?Questions?