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November Pension Newsletter

By November 14, 2022November 15th, 2022Announcements

What do this year’s investment returns mean
for my retirement plan?

One of the best ways to maintain calm in volatile markets is to get yourself good, qualified advice. As we suggested at the Learn & Explore conference earlier this year, it’s a wise idea to be open to discussing your options early on in your pre-retirement journey. Even if you have left things to the last minute, there is still room for good financial planning advice. Leading up to retirement, some things that you could look to bring into control are:

  1. Paying off debts including mortgages and credit cards. Heading into retirement with a heavy debt load is daunting and stressful. Is it time to downsize/rightsize your home?   Do you routinely spend more than you earn in a month? Making some changes now to your spending or even really understanding how and why you spend money can assist you in planning your retirement income needs.
  2. Look at your retirement plans and set up an expected budget. No one loves the word budget (except financial planners), but truthfully that hard work and a little forethought and honesty can significantly set you up for financial success in retirement.
  3. Working with a qualified financial planner to project where you might be given the current state of the markets as well as the history of recoveries. All down markets rebound and typically with a quick, sharp return that no one sees coming. Historically missing the BEST 10 days in the market in a 10-year period can reduce your market values by up to 20%! Stay invested
  4. Know what type of investor you are. What is your risk tolerance AND risk capacity?  These are different parts of your investor profile, and both are equally important to understand.

In a volatile market, it can be tempting to “head for the hills” (or a GIC), but don’t despair. Remember that there are a few different types of GUARANTEED income that can be accessed once retirement starts, including Canada Pension Plan and Old Age Security. You may decide to transfer your ELCIC Pension Plan into an annuity to gain some guarantees — but don’t do anything quickly and without advice. 

Regardless of where we are in the market cycle, it’s important to take a disciplined approach to investing and stay focused on your long-term goals. This strategy helps you keep your emotions out of investing, which can result in buying high and selling low, like many investors do. Ongoing monitoring and reviewing of your portfolio also ensure it remains on track. Diversifying investments reduces risk as well.

Paula MacMillan CFP, CHS, BA, EPC 

ELCIC Pension Plan – Investment Committee Member

ELCIC Pension Plan

ELCIC Pension Plan Investment Return

Jan 1 to Sept 30, 2022

Median Balanced Pension Plan as a comparison

Jan 1 to Sept 30, 2022

Excess return
-14.6% -12.6% -2.0

 

For the third quarter of the year, July to September, the plan performance was basically flat, with the Growth fund returning -0.6% and the Fixed Income Fund returning +0.6%. Therefore, the year-to-date results are unchanged and still lagging the benchmark.

The market challenges from the beginning of the year continue to linger, as does the high level of inflation. PH&N notes, “While it appears that peak inflation may be behind us, it is likely to remain well above the target range for some time to come.”

Please note that information is not intended to be investment advice or to be a recommendation for your personal investment portfolio.

Growth Fund

Here is a closer look at each portfolio in the Growth Fund.

PH&N Canadian Equity Value Fund
PH&N Canadian Equity Investment Return

Jan 1 to Sept 30, 2022

S&P/TSX Capped

as a comparison

Jan 1 to Sept 30, 2022

Excess return
-6.9% -11.1% +4.2%

 

With the continued volatility, PH&N is reviewing all their decisions and portfolio positions with a sharper and dynamic perspective. Adjustments are made where the risk/reward review is favorable. This quarter, 0.33% of relative value was added, and year-to-date performance exceeds the benchmark.

RBC Global Equity Focus Pension Trust
RBC Global Equity Investment Return

Jan 1 to Sept 30, 2022

MSCI World ($CAD)

as a comparison

Jan 1 to Sept 30, 2022

Excess return
-23.6% -18.6% -5.0

 

This is also a very volatile market, as early quarter gains in the double-digits evaporated by the end of the quarter. The result for the quarter was -0.3%, which outperformed the index 

of -0.7%, but only slightly improves the year-to-date position. Of interest is that the Health Care and Communications Services sectors were top contributors. PH&N reports that there were “no new initiations or exits in the third quarter; however, we continue to search for great businesses to invest in.”

Baillie Gifford Global Equity Fund
Baillie Gifford Global Equity Investment Return

Jan 1 to Sept 30, 2022

MSCI World ($CAD)

as a comparison

Jan 1 to Sept 30, 2022

Excess return
-29.3% -18.6% -10.7

 

This quarter Baillie Gifford (BG) returned -0.3%, and they continue to lag far behind the benchmark. They cite their investment choice Prosus, which was a top positive contributor in the second quarter, as the top detractor in this quarter. However, BG believes that it still provides good future opportunities as part of BG’s strategy to “provide superior returns primarily through capital appreciation … in a diversified stock portfolio….”

Fixed Income

The Fixed Income portion of the portfolio is managed by PH&N and holds several Funds. Here’s a closer look at each portfolio in the Fixed Income Fund.

PH&N Core Plus Bond Fund
PH&N Core Plus Bond Fund Investment Return

Jan 1 to Sept 30, 2022

FTSE Canada Universe Bond as a comparison

Jan 1 to Sept 30, 2022

Excess return
-11.8% -11.8% -0.0

The bond fund had a positive quarter at 0.63% return, but still shows a significant negative return from the beginning of the year, due to the sharp rise of yields in the first two quarters of 2022. PH&N states, “that this means the yield for your portfolio is significantly higher than at the beginning of the year, which improves prospective returns going forward.”

PH&N Mortgage Pension Trust
PH&N Mortgage Pension Trust Investment Return

Jan 1 to Sept 30, 2022

FTSE Canada

Short-term Bond

as a comparison

Jan 1 to Sept 30, 2022

Excess return
-5.3% -4.7% -0.6

The portfolio is diversified by the following sectors:

Each sector has various conditions that provide opportunities for the investment activities. The Office Sector may have the most uncertainty, as decisions are made on returning to the office or continuing to work from home. The Industrial Sector is the largest in the portfolio, and it is experiencing a very low vacancy rate, which our manager sees as a strong positive for this market. PH&N concludes, “Looking forward, our lending posture favours the stability and quality of the industrial and multi-residential sectors, though we will continue to pursue attractive reward-for-risk opportunities across the market.”

PH&N High Yield Mortgage Fund
PH&N High Yield Mortgage Investment Return

Jan 1 to Sept 30, 2022

FTSE Canada

Short-term Bond

as a comparison

Jan 1 to Sept 30, 2022

Excess return
3.2% -4.7% +7.9

PH&N looks for quality in all aspects of structuring this portfolio. Currently, there are no mortgages in arrears, and the metrics of debt-to-service ratios are a testament to this quality. 

Reminder: Strategic Pension Review – banner

Report for Plan Members & Employers - subtitle

We wanted to remind you that in May 2022, the quarterly pension news included GSI’s report on our findings arising from the task set out at the 2021 Eastern Synod Assembly. If you missed it or would just like to review, it is always available under the News section of GSI’s website.

 

*Please note that information is not intended to be investment advice or to be a recommendation for your personal investment portfolio.

Report for Plan Members & Employers

We wanted to remind you that in May 2022, the quarterly pension news included GSI’s report on our findings arising from the task set out at the 2021 Eastern Synod Assembly. If you missed it or would just like to review, it is always available under the News section of GSI’s website.

Have a question for GSI?

If you have a question for GSI, please reach out. Information and resources can also be found on the GSI website.
GSI Website:  elcicgsi.ca
Winnipeg Residents: 204-984-9181
Toll Free: 1-877-352-4247
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