We design our asset mix to provide strategic growth to the Plan’s asset base, balancing the need to generate yield on our investments with downside risk mitigation. Our diversified portfolio benefits from our participation in a wide range of public and private market investments. We continue to search for these opportunities as we strive to achieve returns that exceed our benchmark and long-term return objective.
Near the end of 2020 we updated our Plan’s policy mix (which is the long-term asset mix target) to include an allocation to public market alternatives. Public market alternatives are investment strategies that invest in a wide range of tradable securities using non-traditional investment techniques and seek absolute returns which are uncorrelated to traditional markets. This allocation has a dedicated allocation of 0%, but the Plan is permitted to invest up to 7.5% of total assets to these strategies. The Plan views this investment as providing the opportunity for additional diversification.
The Plan’s policy mix is the long-term asset mix target for the Plan. Deviations from the policy mix are permitted in order to participate in attractive investment opportunities. We monitor these deviations on an ongoing basis and rebalance the portfolio towards the policy mix as required.
Public Investments
The Plan’s public portfolio represents approximately 67% of the fund’s total assets and consists of public equity and public debt (also referred to as 'fixed-income').
Public equity represents ownership in public companies. Often referred to as 'stocks', these investments have higher expected rates of return relative to fixed-income securities but generally have a higher degree of risk. They are an important part of our Plan’s asset mix that provide diversification and add to the Plan’s expected rate of return. Public equities currently represent approximately 39% of the Plan’s total assets. The chart below breaks our public equity portfolio down geographically.
Fixed-income securities are investments that are typically issued by government entities or large corporations. They provide contractual payments at regular intervals as well as a repayment of the initial investment. Exposure to fixed-income provides the Plan with stable cash flows to pay for member benefits and can reduce the Plan’s exposure to interest rate risk. Currently, public fixed-income represents approximately 28% of the Plan’s total assets.
As demonstrated by the chart below, roughly 50% of our fixed-income portfolio is invested in government securities with the other 50% invested in the debt of corporations.
Private Investments
Our private portfolio includes investments in real estate, infrastructure, private debt and private equity. Our approach to private markets is to build close, long-term relationships with a carefully selected group of like-minded investment partners. In all four asset classes, we seek to build global, diversified investment portfolios through primary funds, secondary transactions and co-investments alongside our partners. We have the ability to back both well-established managers as well as newer teams.
Currently, our private assets represent approximately 33% of our total portfolio. The chart below demonstrates the proportion of our private portfolio that is invested in each of the private asset classes mentioned above.
