The primary performance objective for the PSPP Fund is to generate a return that exceeds the discount rate used by the Plan’s actuary. The secondary performance objective is to outperform the policy benchmark, which is a weighted average of the passive benchmark returns based on our target asset allocations.
The Investment Team regularly assesses the results by comparing the performance of each investment mandate to its benchmark index and the overall portfolio performance to the policy benchmark performance.
For the one-year period ending December 31, 2018, the Plan experienced a loss of 0.8%, net of management fees. The four-year annualized return was 5.3% and the ten-year annualized return was 8.9%, well ahead of the actuarial discount rate of 6%. Despite a challenging market overall, the Plan achieved its secondary performance objective of outperforming the policy benchmark. As of December 31, 2018, each of the one-year, four-year, and ten-year annualized returns exceeded the respective policy benchmark return.
After several years of favourable market conditions and strong investment returns that led to increases in the Plan’s funded ratio, 2018 was a year with negative performance. As of December 31, 2018, our invested assets were $6.6 billion and our net assets available for benefits were $9.2 billion as of year end.
As our liabilities grew at a faster rate than our investments in 2018, this led to a decrease in the funded ratio from 95.9% at the end of 2017 to 94.1% at the end of 2018.
The funded status and long-term sustainability of the Plan was a key focus for the Board during the 2018 asset liability modelling (ALM) study. We will move forward in 2019 to implement the new asset mix policy and investment strategies that are designed to guide the Plan to long-term substantiality and full funding. We strive to achieve strong investment returns so that our members can rely on their retirement income well into the future.