{"id":17855,"date":"2019-12-18T09:00:50","date_gmt":"2019-12-18T14:00:50","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/air-canada-pension-plan-investment-team-launches-investment-management-firm-140615"},"modified":"2019-12-18T09:00:50","modified_gmt":"2019-12-18T14:00:50","slug":"air-canada-pension-plan-investment-team-launches-investment-management-firm","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2019\/12\/18\/air-canada-pension-plan-investment-team-launches-investment-management-firm\/","title":{"rendered":"Air Canada pension plan investment team launches investment management firm"},"content":{"rendered":"
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Yaelle Gang<\/span> | December 18, 2019<\/p>\n

In 2009, the Air Canada pension plan was in dire straits with a $2.6 billion solvency deficit. A decade later, it has a surplus of more than $2 billion. The complete turnaround is in part due to a new investment team that joined in 2009 and transformed the pension fund\u2019s investments.<\/p>\n

With the $21 billion investment pot for Air Canada\u2019s pensioners in good shape, the investment team is launching a new investment management firm called Trans-Canada Capital Inc., which is operating as a subsidiary of Air Canada.<\/p>\n

The new corporation, which officially opened for business in February 2019, is offering its services to other institutional investors. It took on its first client this summer and launched a website in November.<\/p>\n

Read: How Air Canada\u2019s pension took off as Canada Post\u2019s plan sank into deficit<\/a><\/strong><\/p>\n

And other pension plans are showing interest, says Vincent Morin, the president of the TCC, who initially joined Air Canada\u2019s investment team in 2009.<\/p>\n

Historically, the Air Canada pension plan was externally managed using a traditional 60\/40 mix of public equities and bonds, he says. \u201cWe came off a very large deficit back then, which was quite problematic for the company. And we were able, over the years, to basically generate sufficient returns and reduce the risk and put the pension plan in a surplus position as we speak. So it was a great turnaround story that we have.\u201d<\/p>\n

Today, roughly 80 per cent of the TCC\u2019s assets are managed internally and it has a much more diversified portfolio. In terms of asset mix, 85 per cent is in fixed income securities, 10 per cent is in equities, 20 per cent is in alternatives \u2014 essentially real estate, infrastructure, private debt and private equity \u2014 and 10 per cent is in its portable alpha program, which is hedge funds. The total is 125 per cent because the plan uses leverage to increase its bond allocation in order to hedge interest rate risk.<\/p>\n

The investment team uses a liability-driven strategy for Air Canada\u2019s pension. \u201cWith low yields it translates into higher liabilities and we want to match that as much as possible, but always in a very actively managed approach,\u201d says Morin.<\/p>\n

Read: Is Air Canada\u2019s move to enter annuity market the start of a new pension trend?<\/a><\/strong><\/p>\n

In the 26 quarters to Dec. 31, 2018, the plan beat its benchmark by a total of about four per cent, he notes. \u201cWhen you compound that over a long period like that, it translates to a very big amount, which significantly helped the turnaround of the pension plan from a deficit to a surplus.\u201d<\/p>\n

The TCC is set up so a pension fund can hand over its whole portfolio for management, but it can also choose to just buy into a particular fund. \u201cFor sure, if a pension fund would like to give [us] their whole pension fund, we\u2019d be very happy to manage it and we are structured to do it because, basically, for Air Canada\u2019s pension plan we manage all the asset classes,\u201d says Morin.<\/p>\n

Air Canada is currently marketing a multi-strategy hedge fund, two fixed income funds and a fund of hedge funds. And it will be offering more fund options in the future.<\/p>\n

This article originally appeared on<\/em> Benefits Canada\u2018s companion site, the<\/em> Canadian Investment Review<\/a>.<\/em><\/p>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Yaelle Gang | December 18, 2019 In 2009, the Air Canada pension plan was in dire straits with a $2.6 billion solvency deficit. A decade later, it has a surplus of more than $2 billion. The...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/17855"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=17855"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/17855\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=17855"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=17855"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=17855"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}