The University of British Columbia's CAD500 million (USD326 million) Staff Pension Plan is considering reducing its equity derivatives position and putting the proceeds into the cash market. Roger Polishak, associate treasurer, explained that the move reflects a recent decision by the Canadian government to raise the cap on foreign investments by 5% to 30% (DW, 4/30). The pension fund has a 40% allocation to non-Canadian equities with just 20% invested in the cash market and 20% in swaps and pooled funds, in order to circumvent the previous 25% cap.
"We could go direct on a portion of what we have in the derivatives market. We're doing a review of the asset mix...if it comes back saying we should be looking at direct investment, we would make a partial shift," Polishak continued. The fund could halve the 10% allocation to swaps held in a CAD50 million derivatives mandate run by TD Quantitative Capital, a division of TD Asset Management in Toronto. The money is likely to be transferred to existing mandates, he added. Officials at TD did not return calls by press time. The fund is considering the move because the new cap gives more room to invest directly, which is a less expensive route, said Polishak, declining to put a time scale on the decision.
The other 10% portion of the indirect investments is in pooled portfolios run by the fund's two global balanced managers. Overall, the fund allocates 20% to U.S. equities, 20% to overseas equities and 20% to domestic equities, 37% to Canadian bonds and 3% in mortgages-backed securities.
