Vestcor Continues to Exceed Long-Term Client Objectives Amid a Historically Challenging Year | May 11 2023
May 11, 2023
Fredericton, NB – Atlantic Canada’s largest investment firm once again exceeded the long-term investment objectives of its clients, protecting the assets of clients and their members through a particularly challenging year in the financial markets. Vestcor Inc. (Vestcor), an independent not-for-profit company based in Fredericton, NB, offers global investment management and pension and benefit administration services to a number of public sector entities.
While many pension plan managers experienced double digit negative returns during a historically challenging year, Vestcor’s results provided reassurance that their lower risk approach required by many of their Shared Risk and Target Benefit Plan clients support the sustainability of these pension plans to the benefit of their members.
Vestcor achieved overall returns of -3.63% during 2022. This is particularly significant when compared to the median gross returns (pre-fee) of Canadian defined benefit pension plans, which was -10.3% for the same period, as noted in a recent report by RBC Investor & Treasury Services (RBCITS). More importantly, Vestcor’s longer term 4-year gross annualized pension plan return was 5.99% at year-end, comparing favourably to the 5.32% 4-year median return also reported by RBCITS.
Also of significance was the return realized above clients’ investment policy benchmarks. The active management activities of Vestcor’s highly specialized employees led to an outperformance of client-set benchmarks by a record 2.63% during the year, adding $538 million in value to clients. These additional returns have added 1.31% per annum or over $1 billion in investment earnings for clients during the most recent four-year period.
Vestcor’s administration service team continued to be challenged in 2022 by significant additional transactional processing volumes and member service inquiries, however they were successful in continuing to meet most client processing time targets.
In addition, Vestcor’s clients benefit from the organization’s cost-efficient, not-for-profit model. The investment management expense ratio was 0.14%, or 14 cents per $100 of average net assets, well below the average expense ratio of most investment management alternatives. Pension administration service fees also remained as the second most cost efficient as compared to a select group of national peers, at $98 per member, nearly $50 per member below the average from that group.
“We are very pleased to once again share how our not-for-profit client focused design allows us to cost effectively meet the return objectives of our clients.” said John A. Sinclair, President and Chief Executive Officer. “2022 was a particularly challenging year on many fronts. It was truly an outlier year. Consumers continued to re-emerge from the COVID pandemic during the year by rapidly trying to purchase a limited supply of goods and services, accelerating inflation concerns, while a combination of geopolitical events and central bank policy tightening actions all ended up negatively impacting financial markets. Consequently, both equity and fixed income markets contributed significantly negative returns in 2022 – which is not normal behaviour for financial markets. Our overall results however are further evidence to the long-term success of our low-risk approach, achieved by our specialized workforce.”
2022 also saw the launch of Vestcor’s inaugural Responsible Investment Report, available at vestcor.org/investments. The report speaks to the organization’s leadership in and commitment to providing clients with risk management services and tools that assist in developing sustainable long-term investment programs that continue to meet their objectives. Utilizing the guidelines of the Task Force on Climate-related Financial Disclosures (TCFD), the report also provides climate related greenhouse gas emissions disclosure for our consolidated core public securities investment portfolio.
A Partner in Creating and Delivering Sustainable Financial Security.
Located in Fredericton, New Brunswick, Vestcor provides global investment management services to 10 different public sector client groups representing approximately $20.0 billion in assets under management as at December 31, 2022, and administration services to 11 public sector pension plans and 4 employee benefit plans.
Vestcor’s team of more than 140 New Brunswick-based service professionals provides innovative, integrated, cost-effective investment management and pension and benefit administration services solutions to public sector entities. Vestcor currently services the requirements of over 111,000 individual plan members and 140 participating employer groups.
The full 2022 Annual Report, including Vestcor Inc.’s financial statements, will be published in June 2023. Further information about Vestcor is available online at vestcor.org.
John A. Sinclair
President and Chief Executive Officer