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Our transition toward a fit-for-purpose pension fund
- Investments
- Portfolio
Pursuing UPP’s target asset mix
When UPP began assuming management for the pension assets of participating organizations in July 2021, we identified opportunities within the combined portfolio to enhance long-term performance. As a result of our findings, we developed a multi-year transition plan toward one unified and cost effective portfolio tailored to UPP’s funding objectives and investment beliefs.
UPP’s target asset mix is specifically designed to fund our pension benefits for the long term. It will help us maintain a healthy funding and liquidity position, stay well-equipped to pay members’ pensions, and remain agile to investment opportunities as markets evolve. The pace at which UPP can shift toward our target asset mix depends on both structural and transitionary elements, including market movement, liquidity, available investment opportunities, and the duration of investment commitments within the original portfolios. For more information on our target asset mix see our:
Where we're headed
In the short to medium term, UPP will continue to transition the portfolio with these goals in mind:
- balance risk and return within the Plan’s unique context
- selectively internalize aspects of our strategy to save costs and enhance control
- further diversify the fund in line with our investment beliefs, including growing our exposure to private markets and other assets that respond well to inflation
- continue our path toward a net-zero portfolio by 2040 or sooner
- harness our structure and growing scale to yield enhanced value for members
UPP's exposure evolution
The Plan’s asset mix is diversified across a broad range of asset classes, organized in three categories: return enhancing, interest rate sensitive, and inflation sensitive. Under this structure, we divide our total fund assets based on their exposure to key economic drivers as well as their risk-return characteristics and roles in funding the pension.
In line with our target asset mix, we explore new investments with a focus on enhanced cost efficiency and control, alignment with our members’ needs, and long-term value.
Since starting our portfolio transition, UPP’s Investment team has made significant progress in shifting our exposure to certain asset classes, including:
- Adding new private assets in our inflation-sensitive asset class and building and maintaining a robust liquidity position.
- Consolidating our partnerships and mandates to better meet our long-term needs
- Transitioning pooled funds to segregated fund vehicles, which offer greater transparency and investment control and help us better apply our ESG lens
- Decreasing our public equity holdings and redeployed capital into lower-risk assets, including interest rate–sensitive and inflation sensitive assets, which are better aligned with our strategy and pension liability
UPP’s exposure evolution
Inception July 1, 2021 – December 2023
Return
enhancing
enhancing
Interest rate
sensitive
sensitive
Inflation
sensitive
sensitive
Leverage
Return
enhancing
enhancing
Return enhancing strategies generally reduce funding risk over the long term by delivering higher relative rates of return. They can, however, display higher relative volatility (a measure of market risk) in the short term.
Asset subclasses: Public equities, private equities, private debt, absolute return.
Interest rate
sensitive
sensitive
Interest rate sensitive strategies generally reduce funding risk over the long term by helping offset the effects of changing interest rates to our assets and liabilities. This includes long-dated government bonds, which are a stable source of long-term returns and help align our fixed income portfolio with the interest rate sensitivity of our liabilities.
Asset subclasses: Fixed income, inflation sensitive bonds
Inflation
sensitive
sensitive
Inflation sensitive strategies provide stable long-term returns while helping mitigate the impact of inflation on the long-term value of the Plan liabilities, which are linked to salary levels and partially indexed to changes in inflation.
Asset subclasses: Infrastructure,
real estate
Leverage
Short-term money market & funding helps us dynamically change our exposures in a fast-moving market. Proactive liquidity planning ensures we can maintain our desired asset mix and meet our liability obligations while remaining a reliable source for markets when liquidity is scarce.
In 2023, Canadian holdings made up over half (51%) of the Plan’s assets, held in equities, bonds, real estate and infrastructure.
Recent investment activity
Private equity
Return enhancing
CLEAResult
Co-investment with Kohlberg & Company
CLEAResult is an energy efficiency services provider in the US working with utility, government, and commercial customers to design and implement energy efficiency programs to reduce energy usage, costs, and emissions. This co-investment offers UPP a more direct participation model by providing more control and transparency over investments, while also lowering external fees.
Private credit
Return enhancing
CoreWeave
Direct loan participation
UPP participated in its first direct loan in the latest private debt financing for CoreWeave, a cloud-based provider specializing in high-performance computing resources for AI and machine learning applications. This investment diversifies UPP’s private credit portfolio into the IT sector and aligns with their direct participation model, offering greater control, transparency, and reduced external fees.
Infrastructure
Inflation Sensitive Assets
Rowan Digital Infrastructure
Co-investment with Quinbrook Infrastructure Partners
Rowan Digital Infrastructure provides data centre solutions for large digital businesses across the US. Beyond adding important inflation-hedging properties to UPP’s investment portfolio, this investment provides a unique opportunity to help fund the critical infrastructure required for the growth of data centres with renewable energy sources. Read more about the investment here.
Real estate
Inflation Sensitive Assets
Co-Investment, North Vancouver
Co-investment
UPP’s first real estate co-investment is represented by a 420-unit, purpose-built-rental development project in North Vancouver, a key supply-constrained Canadian gateway market. The project will target an 11% affordable housing component and a minimum LEED gold certification.
Public equity
Return Enhancing
Ashmere LP (130-30 Carbon-Reduced Strategy)
Fund investment on a Managed Account Platform, managed by Acadian Asset Management
This UPP-initiated long/short mandate, managed by Acadian Asset Management, has a 2050 net-zero portfolio goal, and seeks to achieve year-over-year carbon reductions. This allows UPP to capture long-term returns while mitigating downside risk and aligning with the commitments of our Climate Action Plan.
Absolute return
Return Enhancing
Whitebox Multi-Strategy Partners Fund
Fund investment managed by Whitebox Multi-Strategy Partners
This credit-focused fund invests in multiple underlying credit-oriented strategies, dynamically allocating risk across them based on the opportunity set. This investment helps align our portfolio with our long-term investment strategy and responsible investing considerations.
Public equity
Return Enhancing
Impactive Capital Fund
Fund investment managed by Impactive Capital
Impactive Capital is a 100% women and minority-owned asset manager running a strategy investing primarily in the small and middle market capitalization segment of the U.S. equity market. The firm shares UPP’s focus on improving environmental, social, and governance factors by engaging with portfolio companies to add long-term value.
- © 2024 University Pension Plan