York University Pension Fund

Leona FieldsManager, Pension Fund

Annual Pension Information Session

April 21, 2006

2

York’s Pension Governance - Internal

• Plan/Benefits side

– Board of Governors

– Vice President, Finance & Administration

– Pension & Benefits Office

– All University Committee on Pensions

• Fund/Investments side

– Pension Fund Board of Trustees

– Sub-Committee on Investment Performance

– Manager, Pension Fund

3

York’s Pension Governance - External

• Investment Managers

• Custodian - CIBC Mellon

• Auditor - Ernst & Young

• Investment Consultant - Towers Perrin

• Manager Search Consultant - Brockhouse Cooper

• Actuary - William M. Mercer

• Third Party Administrator – Seclon Logic

4

Key Differentiating Factors for York Pension Fund

• Primarily a Defined Contribution Plan

– But members do NOT have investment options

• Benefits depend on investment returns

– Adjustments after retirement continue to depend on investment returns – not inflation

• Investment policy decisions must consider multiple risk profiles

– Plan Sponsor

– New plan members

– Members close to retirement

– Retirees

5

York’s Pension Investment Objectives

• The Fund shall be managed with the primary objective of providing high rates of return and moderate levels of risk

– Securing minimum guarantee pensions for all active members while providing potential for growth

– Managing volatility of money purchase balances

– Providing a reasonable level of inflation adjustment for pensioners

6

Diversification Reduces Risk

“Don’t put all your eggs in one basket”

• Various parts of the Fund have different characteristics and risk levels

• Overall risk level of the Fund can be reduced by diversifying across

– Security holdings

– Asset classes

– Investment strategies and styles

– Investment managers

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The York U Pension Fund is Well Diversified

• 5 Asset Classes

– 40% Canadian bonds

– 30% Canadian equity

– 15% U.S. equity

– 15% International equity

– Up to 10% Cash

• 10 Investment Portfolios

– 2 Canadian bonds (active & passive)

– 3 Canadian equity (active, complementary styles)

– 2 U.S. equity (active & passive)

– 3 International equity (active, complementary styles)

8

Current Pension Investment Policy

Asset Mix

Cdn Bonds40%

Cdn Equity30%

U.S. Equity15%

Int'l Equity15%

Manager Structure

Foyston Gordon &

Payne10%

Gryphon5%

Alliance Bernstein

5%

WEDGE5%

TD U.S. Equity10%

McLean Budden10%

Sceptre10%

Addenda10%

TD Bonds30%

LSV5%

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Investment Results 4-Years ending Dec. 31, 2005

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Investment Return Summary for 2005

Returns Benchmark

Canadian Equity 26.0% 24.1%

Bonds 6.2% 6.5%

U.S. Equity 3.3% 3.5%

Int’l Equity 10.9% 10.0%

Total Fund return (gross) 12.1% 11.8%

Total Fund return (net) 11.7%

4 year Fund return (net) 7.6%

Pension Adjustment 1.5%

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Cash Flow Summary

Budget/ Estimated

2006 2005 2004 2003

Beginning of Year Fund Value 1,185,599,383 1,068,852,403 982,023,304 862,404,555

Contributions University Contributions 24,660,000 23,911,895 22,328,714 20,610,658 Members' Contributions 14,400,000 13,909,632 12,851,595 11,849,379 Transfers-in from other plans 1,800,000 2,446,046 909,562 852,809Total Contributions 40,860,000 40,267,573 36,089,871 33,312,846

Investment Income ?? 128,824,929 99,370,620 129,157,445

Benefits Paid Monthly Pensions 39,600,000 37,051,448 33,762,700 30,975,703 Lump Sum Payments 10,000,000 9,889,761 9,737,746 7,394,798Total Benefits Paid 49,600,000 46,941,209 43,500,447 38,370,501

Investment Expenses Investment Mgmt Expenses 3,349,173 3,489,022 3,604,693 2,979,429 Other Investment Expenses 730,930 679,338 462,127 334,548Total Investment Expenses 4,080,103 4,168,360 4,066,821 3,313,977

Administrative Expenses Actuarial & Consulting 315,000 240,340 292,284 361,669 Pension Administration 1,095,000 995,614 771,840 805,395Total Administrative Expenses 1,410,000 1,235,953 1,064,124 1,167,065

End of Year Fund Value ?? 1,185,599,383 1,068,852,403 982,023,304

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Issues for 2006

• Review, research and explore alternative sources of investment returns

– Currency management

– Long / short market neutral strategies

– Hedge funds

– Infrastructure

– Private equity

– Global investing