The British Columbia Investment Management Corp.’s (BCI) produced an annual combined pension return, net of costs, of 9% for fiscal 2018, ended March 31, vs a combined market benchmark of 7.4%, generating $1.9 billion in added value for BCI’s pension plan clients.
A key contributor was the outperformance of global equities relative to their benchmark. Illiquid asset investments — such as infrastructure, private equity and renewable resources — outperformed for the calendar year and delivered above-benchmark returns.
BCI, which manages $145.6 billion in assets for British Columbia’s public sector, focuses on generating long-term wealth while protecting the value of the funds as pension plans have long-term financial obligations.
BCI’s investment activity provides $75, on average for every $100 a pension plan member receives in retirement benefits. Over the five-year period ended March 31, the annualized return was 9.9% against a benchmark of 8.7%, adding $5.8 billion in value. For the 10-year period, the annualized return was 7.4% against a benchmark of 6.8%. BCI added $6.6 billion in value over this period.
BCI began transforming its investment strategy and business model in 2015 from a more passive investment model, which was historically able to generate the necessary returns, to an active in-house model with a greater probability of sustained long-term performance.
“BCI has a proud history of investing for British Columbia’s public sector,” said Gordon Fyfe, BCI’s CEO and chief investment officer. “Our transformation to an active in-house asset manager, diversifying globally and with a focus on illiquid investments, ensures that we continue to provide the returns our clients need.”
BCI’s operating costs were 29.6¢ per $100 of net assets under management, up from 24.2¢ in fiscal 2017. Costs incurred on BCI’s behalf by third parties and netted against investment returns are not included in operating costs. By increasing the percentage of assets managed by BCI’s investment professionals, the organization is making the transition from a reliance on third parties to a more cost-effective model of managing clients’ illiquid assets.
In fiscal 2018, BCI increased managed net assets to $145.6 billion, up from $135.5 billion the previous year. BCI’s asset mix as of March 31 was as follows: public equities (44.3%, or $64.6 billion); fixed-income (21.8%, or $31.7 billion); real estate (14.4%, or $21 billion); infrastructure (8%, or $11.6 billion); private equity (7.1%, or $10.3 billion); mortgages (2.5%, or $3.6 billion); renewable resources (1.8%, or $2.6 billion); and other strategies (0.1%, or $0.2 billion).
BCI’s 2017-18 corporate annual report is available on the organization’s website.