Human Resources

Diversified Equity Fund Review

New Investment Mix for Diversified Equity Fund

With a goal of increasing returns and/or reducing the fund’s volatility, a review of the Western Diversified Equity Fund is now complete and a new strategy is being implemented. The year-long review included two information sessions for members in January 2012, and a review of the entire universe of potential investment strategies.

The Joint Pension Board carefully assessed and measured each approach against the Board’s principles and investment beliefs.

Because the Western Retirement Plans are defined contribution plans, there is a high need for liquidity. As a result, some strategies with attractive risk and return characteristics, such as private equity, infrastructure and private real estate were not considered a good fit.

The Joint Pension Board settled on global small cap equities and emerging markets equities to provide additional return to the Fund. Smaller companies, although more volatile than larger ones, offer higher expected returns. Emerging markets equities also offer potential for higher returns than developed markets as they are expected to be a strong source of growth to the global economy. Like small cap stocks, emerging markets equities are also riskier. To counterbalance the added volatility in the portfolio, the Joint Pension Board decided to add a low volatility equity strategy. It will focus on stocks that are expected to exhibit less volatility due to their sector of operations or the leverage on their balance sheet. This type of strategy has also demonstrated an ability to generate attractive returns compared to traditional equity strategies. The two charts below show the composition of the Diversified Equity Fund before and after the changes are fully implemented.

All changes should be completed during the second quarter of 2013, included selecting investment managers for the new mandates and transitioning the assets.  No action by plan members is required as a result of these changes. If you invest in either the Diversified Equity Fund, the Balanced Income Fund or the Balanced Growth Fund, you will automatically be exposed to the new Fund. 

If you have any questions about these changes, please contact HR Communications by email at hrhelp@uwo.ca or call 519-661-2194. 

Comparing the Existing and the New Mix

DEF New and Old

Background

The Diversified Equity Fund (DEF) is one of the 15 investment options offered by the Western Retirement Plans, and it is the one that has the most assets. As of the December 31, 2012, the fund had $475 million in assets, or 42.2% of all assets of the Retirement plans. 

Western’s Joint Pension Board undertook a review of the investment policy of the Diversified Equity Fund in 2012. This will affect the type of investments that can be held in the Fund. Input from members of the Western Retirement plans was sought. Two information sessions were held for Pension Plan members on January 16th and 18th, 2012.

Why did Western review the DEF Fund?

Western undertakes regular reviews of all its funds. In the case of the DEF, the last time the fund was significantly modified was October 2008 when a 17.5% allocation to global equity was made. The new strategies were funded by a reduction in U.S. equities.

What are the goals of the review of the DEF Fund?

In short, the goal is to improve returns and reduce volatility. More specifically, our strategy considered:

The most important aspect of the review conducted by Western’s Joint Pension Board and the Pension team involved an analysis the asset mix of the fund and consideration of new investments. You may view a list of the investments that were considered.

How do I know if I currently hold funds in the Diversified Equity Fund?

Log in to your Western Retirement Plan account. Choose “Balances”. There you will see what funds are held in your account.

Other Background Material

DEF Annualized Returns

DEF Background from 2010 Annual Report

New Investments Considered

Presentation from Information Meetings