Policy Asset Mix
- Featured Image
-
ATRF strategically builds its portfolio to manage risk while also striving to ensure the returns are able to properly fund our plans.
The ATRF Board sets the strategic asset mix (or policy asset mix), investment policies, and goals for ATRF’s portfolio, which are the most important drivers of pension plan funding and investment success. ATRF’s governing legislation requires AIMCo to function as the investment manager, so AIMCo performs day-to-day management of investments, while ATRF monitors their performance and ensures adherence to the investment strategy.
The current long-term policy asset mix was adopted in 2014, following an asset-liability modelling study, which was revisited, but not changed in 2018. ATRF typically conducts this study every four to five years with the goal of determining the most appropriate asset mix for the plan. A study did occur throughout the calendar year 2023, and a new mix was approved by the ATRF Board to be implemented over the calendar year 2024. The policy asset mix includes traditional public market assets, such as equities and bonds, as well as private market assets, such as real estate and infrastructure.
| Policy Asset | At Aug. 31/2023 |
|---|---|
| Return Enhancing (RE) | 45% |
| RE - Global Equity | 35% |
| RE - Private Equity | 10% |
| Fixed Income (FI) | 20% |
| FI - Universe Bonds | 9% |
| FI - Long-term Bonds | 9% |
| FI - Short-term Bonds | 2% |
| Inflation Sensitive (IS) | 25% |
| IS - Real Estate | 15% |
| IS - Infrastructure | 10% |
| Absolute Return | 10% |
Return Enhancing Assets
Return enhancing assets are generally expected to provide the highest return over the long term, but reflect a higher risk profile than other assets in the plan. Return enhancing assets are the largest investment category in the fund, and include our public and private equity portfolios.
We diversify our public market equity portfolios by investment style, company size, and geography in order to mitigate risk. Our private equity assets consist of a diversified combination of limited partnerships and direct investments.
Fixed Income Assets
Fixed income assets are typically among the lowest risk assets in the fund and are expected to provide lower but more stable returns than other asset categories over the long term. They are also a powerful diversifier that tends to perform well when return enhancing assets falter. ATRF’s fixed income assets are diversified across short-, medium- and long-term maturity dates and include both government and corporate issuers.
Inflation Sensitive Assets
Inflation sensitive assets are included in the fund to provide returns that are at least partially correlated to inflation over the very long term. This characteristic provides a degree of long-term funding protection as pension benefits under the plans are 70% indexed to inflation. This asset category includes our real estate and infrastructure investments.
Absolute Return Assets
Our absolute return assets play an important role in diversifying risk by generating investment returns that are relatively stable and largely uncorrelated with more traditional assets such as equities. These assets are highly diversified, reflect a wide range of risk-return profiles, and include managed futures, hedge funds, and other multi-asset strategies.