Update on Government of Manitoba Centralized Investment Management Proposal

Aug 19, 2021
In December 2019 the Premier of Manitoba requested that Public Sector Pension Plans (the Plans) in the province investigate whether a centralized investment management approach would provide significant improvements to plan investment results. The government also stated that this was not an attempt to consolidate the various pension plans or other pools of funds and was not an attempt to take over the assets of pension plans by the government or any of the other major pension plans.

In May of this year, the HEPP Board of Trustees (the Board) communicated its decision to the provincial government that the best investment approach, for the current and long-term benefit of all stakeholders and members of the Plan, is that HEPP investments should remain separate and independent of any formal provincial centralized multi-plan investment structure. 

HEB Manitoba, on behalf of the Board, collaborated with the other large Plans over a period of approximately 12 months to explore the Premier’s request—specifically to answer key questions relating to the cost efficiencies of such a proposal in comparison to current costs, as well as whether such a structure could provide investment performance benefits not realized by the Plans today.  

This analysis was completed by the working group and shared with government on October 1, 2020 along with a recommendation to proceed with a joint independent detailed feasibility study to provide comprehensive information to support any decision on the subject.

After further communications between all parties, the Board decided it was in the best interests of HEPP stakeholders undertake an independent feasibility study that focused on providing the information they required to make a decision on the right course of action for the HEPP and its members.

This comprehensive study, completed by an internationally recognized management consultant in April 2021, concluded that HEPP is better off remaining independent from the proposed central investment management organization, as the benefits of return improvement and cost savings do not outweigh the operational costs and risks.

To evaluate any proposed change to the HEPP investment strategy, it is important that we understand both the performance and costs involved. 

As reported in our 2020 Report to Members: “Over the past 10 years, HEPP’s investment returns have exceeded the rate of return required to fund the Plan by 1.7% annualized, net of all costs. This translates into over $1 billion of surplus added. Our investment returns have also outperformed the benchmark returns over that time period, adding over 0.5% annualized, net of all costs, or over $400 million of value. For over 15 years, HEPP has been participating in pension investment cost surveys within the Canadian pension industry. These surveys show that our costs have been below or at the average of Canadian pension plans.”

If we look at the current health of HEPP, most recently we reported that our going concern and contribution sufficiency ratios increased to 111.7% and 112.8% respectively at year end. These figures highlight our present and long-term sustainability and financial capacity to meet our pension payment commitments. 

According to the latest Benefits Canada Top 100 Pension Funds survey, HEPP continues to grow and is now ranked #32 in Canada as well as being the largest fund in Manitoba. The Benefits Canada survey ranks funds by dollar value, but HEPP is also the largest plan in Manitoba by membership.

Over the past 10 years, HEPP has achieved an annualized investment return of 8.0% net of costs as compared to the 6.3% investment rate required to fund the plan. This has been accomplished at a cost comparable to other Canadian plans.

On behalf of the Board, I would like to add that this exercise, although unplanned, has instilled in us an even higher degree of comfort and confidence that our investment approach and team provide exceptional value and performance that has been customized to meet the unique requirements of our Plans and will continue to do so for its long-term wellbeing.  

Thank you,

Cynthia Ostapyk Signature 2015

Cynthia Ostapyk

Chair, Healthcare Employees’ Pension Plan Board and COLA Plan Board

© 2024 HEB Manitoba


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