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ATRF’s strategies for managing and protecting pension assets in turbulent times

Global markets have seen significant turbulence in the last few weeks, which might have some ATRF members concerned about their pension assets. During this ongoing global health crisis there are job losses, business closures, market volatility, and – especially for the Alberta economy – the effects of an oil price war. Despite all this, let me take this opportunity to reassure you that your pension is safe. 

First and foremost, your pension benefits are not a function of market returns over any short period of time. Of course, over the long term our portfolio must provide the funds to pay pensions, but what happens over the course of a few months will not impact your pension benefits.

As you likely know, the Government of Alberta has mandated that AIMCo will take over the management of ATRF assets. While we are working with AIMCo on that transition, our assets remain under ATRF management at this time. I would like to give you an update on our investments, and explain to you what we're doing to manage during these turbulent times. 

Over the last several weeks the markets have shifted and there's no escaping the fact that investments have taken some hits. But it's in times like this that it's important to remember—market environments like we've seen recently are a normal, if unpleasant, part of the reality of long-term investment funds like pension plans. 

With our experience managing teachers' assets over the past several decades we realize these events happen, we just don't know when they will happen. That's why we do our best to build a portfolio that's resilient, with representation across asset classes and strategies that don't all move in the same direction at the same time. 

For example, a 10-year government bond might not seem exciting at a yield of less than two per cent, but our experience has shown us that when the storm comes, that bond will provide a nice offset. As I write this, the Canada 10-year bond price has risen about nine per cent since year-end. It won't be enough to offset everything, but it reduces the hit the fund takes. 

We do other things too, like occasionally using strategies specifically designed to mitigate market downturns. Further, our Board uses prudent measures when developing a funding strategy and carrying out actuarial valuations to provide cushion for markets like this. (For more information on this, see the funding section of our 2019 Annual Report.) 

In short, we build the boat to withstand the storm. We'll still feel it, but it won't sink us. 

It's interesting that when markets are raging like they are now, people often ask what we're doing in the midst of this volatility. Usually they expect to hear that we've sold stocks or something similar. But when the volatility hits, it's too late for that. The question should be whether we've constructed our portfolio during the good times to withstand the bad. While it's too soon to have a reading on how the fund has behaved through this recent bout of volatility, we are confident that we've set up the portfolio to withstand rough seas like this. There's no denying the ride is rough and not much fun, but there's no danger of the boat sinking. 

Pension plans are long-term investments and one thing to keep in mind is that the market historically corrects itself over time. In the meantime, we are accessing opportunities at the margin. With a resilient portfolio and a long-term focus, we can take advantage of some gems that arise because not everyone has built their asset portfolio with this long-term stability in mind. 

As always, our main priority is the security of your pension and, of course, your peace of mind. So, we will continue to keep you informed and updated as things unfold, but rest assured that our boat is upright and will continue to weather this storm.  

Gary Smith

VP, Fund Risk and Strategy

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