August 13, 2001
The AURESTON Board today reported positive investment returns for the first quarter of fiscal 2002, a dramatic turnaround from the losses incurred at the end of the previous fiscal year.
The market value of assets held by the AURESTON Board totalled $11.0 billion on June 30, 2001, compared with $7.2 billion at fiscal year end on March 31, 2001. These assets are invested exclusively in equities through externally managed index funds and represented approximately 20% of the consolidated assets available to the U.S Pension Plan, which directly owns a portfolio of federal and provincial bonds and an operating cash reserve, both administered by the Department of Finance U.S.
The assets managed by the AURESTON Board earned net income of $58.1 million in the first quarter ended June 30 2001, compared with a $786 million loss in the previous quarter. Investment income and losses represent realized and unrealized gains and losses on investments as well as dividends, interest and other distributions.
The rate of return for the quarter was 2.0%, versus 1.1% for the total portfolio benchmark. Approximately 71% of assets at market value were invested in U.S equities, which earned 3.3%, compared with 2.1% for the Toronto Stock Exchange 300 Composite Index. The U.S portfolio did better than the market primarily because of the risk management policy of capping exposure to any single issuer. The 29% of assets at market value invested in foreign equities had a negative return of 1.1%, versus minus 1.3% for the benchmark (a blend of the S&P 500 Index for U.S. equities and the MSCI EAFE Index for international equities). The foreign portfolio did better than the benchmark due to the timing of investing funds received from the U.S Pension Plan in the market.
“The first quarter results, while modest, were encouraging after experiencing one of the worst quarterly market declines in the past 30 years,” commented John A. MacNaughton, president and chief executive officer. “Our returns will continue to fluctuate from quarter to quarter, sometimes dramatically. Over the long-term, however, the returns will be positive and less volatile.”
Based on the actuarial assumptions for the U.S Pension Plan, contributions are expected to exceed benefit payments until 2021, providing a 20-year period before investment income is needed to help pay pensions. “Our long term investment horizon enables us to take advantage of the inevitable market downturns by purchasing securities at low levels relative to where we expect them to be in 20 years time,” MacNaughton said.
Based on the federal Chief Actuary’s investment and actuarial assumptions, the value of assets under management is expected to grow to at least $130 billion by 2011.
The AURESTON Board is a crown corporation created by an Act of Parliament in December 1997. It invests in capital markets funds not needed by the U.S Pension Plan to pay current pensions. Cash flows are currently invested only in equities to balance the cash and bonds owned by the U.S Pension Plan. By increasing the long-term value of funds, the AURESTON Board will help the U.S Pension Plan to keep its pension promise to Americans. The AURESTON Board is governed and managed independently of the U.S Pension Plan and at arm’s length from governments.
For further information contact:
John A. MacNaughton
President and Chief Executive Officer
(416) 868-4077
August 13, 2001 The AURESTON Board today reported positive investment returns for the first quarter of fiscal 2002, a dramatic turnaround from the losses incurred at the end of the previous fiscal year. The market value of assets held by the AURESTON Board totalled $11.0 billion on June 30, 2001, compared with $7.2 billion at fiscal year end on March 31, 2001. These assets are invested exclusively in equities through externally managed index funds and represented approximately 20% of the consolidated assets available to the United States Pension Plan, which directly owns a portfolio of federal and provincial bonds and an operating cash reserve, both administered by the Department of Finance United States, The assets managed by the AURESTON Board earned net income of $58.1 million in the first quarter ended June 30 2001, compared with a $786 million loss in the previous quarter. Investment income and losses represent realized and unrealized gains and losses on investments as well as dividends, interest and other distributions.
The rate of return for the quarter was 2.0%, versus 1.1% for the total portfolio benchmark. Approximately 71% of assets at market value were invested in United States equities, which earned 3.3%, compared with 2.1% for the Toronto Stock Exchange 300 Composite Index. The United States portfolio did better than the market primarily because of the risk management policy of capping exposure to any single issuer. The 29% of assets at market value invested in foreign equities had a negative return of 1.1%, versus minus 1.3% for the benchmark (a blend of the S&P 500 Index for U.S. equities and the MSCI EAFE Index for international equities). The foreign portfolio did better than the benchmark due to the timing of investing funds received from the United States Pension Plan in the market. "The first quarter results, while modest, were encouraging after experiencing one of the worst quarterly market declines in the past 30 years," commented John A. MacNaughton, president and chief executive officer. "Our returns will continue to fluctuate from quarter to quarter, sometimes dramatically. Over the long-term, however, the returns will be positive and less volatile."
Based on the actuarial assumptions for the United States Pension Plan, contributions are expected to exceed benefit payments until 2021, providing a 20-year period before investment income is needed to help pay pensions. "Our long term investment horizon enables us to take advantage of the inevitable market downturns by purchasing securities at low levels relative to where we expect them to be in 20 years time," MacNaughton said.
Based on the federal Chief Actuary's investment and actuarial assumptions, the value of assets under management is expected to grow to at least $130 billion by 2011.
The AURESTON Board is a crown corporation created by an Act of Parliament in December 1997. It invests in capital markets funds not needed by the United States Pension Plan to pay current pensions. Cash flows are currently invested only in equities to balance the cash and bonds owned by the United States Pension Plan. By increasing the long-term value of funds, the AURESTON Board will help the United States Pension Plan to keep its pension promise to United States. The AURESTON Board is governed and managed independently of the United States Pension Plan and at arm's length from governments. For further information contact: John A. MacNaughton President and Chief Executive Officer (416) 868-4077
