For nearly two decades, UBC Investment Management has stewarded UBC’s endowment and pension assets with a balance of disciplined investment practices and rigorous management of risk. In doing so, we’ve built a record of strong, reliable returns.
Our mandate and goal in managing the assets is to maximize net real returns commensurate with the objectives, liability requirements and risk parameters of each fund, while embedding responsible investing practices throughout the investment decision-making process. Specifically, our responsibilities include:
Preparing the university’s long-term investment policies for each fund’s obligations and risk tolerances, and recommending these to our Board (for ultimate submission to the UBC Board of Governors)
Implementing policy asset mixes
Evaluating each portfolio’s performance to ensure effective implementation of the long-term policy asset mix
Evaluating the appropriateness of asset mixes across our portfolios relative to liabilities and return objectives
Evaluating, hiring, monitoring and, when appropriate, dismissing external investment managers
Ensuring efficient and cost-effective day-to-day operations
UBC Investment Management does not make direct investments in traded securities — in other words, we don’t buy and sell individual company shares. Rather, we take a manager of managers approach, constructing portfolios by engaging top tier professional investment managers from around the world with specific expertise and proven records of performance who conduct security selection on our behalf. Our team works to select investment managers that we expect will generate superior risk-adjusted returns over time and have robust responsible investing practices integrated into their investment process.
Our overall investment strategy depends on our careful evaluation of prospective managers to ensure they meet our standards and can achieve the university’s goals. Therefore, our investment due diligence process is extremely rigorous to provide confidence that a chosen partner will benefit the funds we manage.
Managers are monitored and evaluated on an ongoing basis. Should a manager not meet our clear and high performance and responsible investing standards, our team will seek replacement managers when and where appropriate.
Our investment framework is a total portfolio approach, designed to clarify decision making in each step of the investment process and embed transparent measurement processes to support continuous improvement. The framework empowers governance bodies to make informed decisions by providing them with information they need to oversee the effectiveness of the investment decisions taken. We believe good governance is a key foundation for long term success in investing.
Our approach is focused on three key points, establishing clear accountability for investment decisions and measuring the results to ensure they are contributing to achieve the fund’s financial objectives. They are:
- Determining the long-term return required to meet a fund’s financial objectives and risk tolerance level
- Selecting the target mix of assets expected to maximize the probability of achieving the financial objectives at the accepted risk level
- Determining how to implement the target asset mix to achieve the best net-of-fee return
We’ve established three key portfolio tiers that capture these decisions and work together to implement our investment framework.
- A simple set of public assets expected to meet a fund’s long term financial objectives
- Establishes the overall risk tolerance for investment decision-making
- Enables governing bodies to monitor a fund’s ability to deliver a required return at the defined risk level
- Enhances diversification beyond the Reference Portfolio and establishes the target asset mix
- Sets the long term strategic direction for implementation in the Investment Portfolio
- Expected to generate incremental return above the Reference Portfolio
- The Investment Portfolio is the actual investment exposures in our managed funds, actively managed by the UBC Investment Management team
- Focused on maximizing total returns at the risk level represented by the Reference Portfolio
- Actively managed through portfolio construction, private asset investments and investment manager selection to add value above the Reference Portfolio
We rigorously monitor the investment performance and risk of each of these three portfolios to assess the effectiveness of our investment decisions and understand when changes are required to ensure the funds we manage will meet their financial objectives.
Our investment framework is centrally focused on maximizing net investment returns at approved risk tolerance level of the funds we manage. In this way, we work to improve the likelihood that the UBC and Staff Pension Plan (SPP) Boards achieve the long-term financial objectives for each fund they oversee, given their unique purpose and liabilities.
By investing in securities through our investment managers, we expose our portfolios to risks – investors are rewarded for accepting certain types of risks and are not rewarded for others. We seek to undertake risks that we understand and can control and avoid those that we do not believe will add value to our managed portfolios.
Our Risk Management framework focuses on managing four elements of risk, when:
- The Investment Portfolio is not able to meet the fund’s long-term financial objectives
- The Investment Portfolio risk level is misaligned with our internal partner’s risk tolerance
- The Investment Portfolio is not able to meet internal and external liquidity obligations; and
- Our external investment manager performance is below our underwriting targets.
To facilitate our analysis and monitoring of these key risks, we use holdings data and investment characteristics data as well as analytical tools to aggregate portfolio exposures and the level of investment risk of the funds we manage to compare against the Reference Portfolio and Strategic Portfolio.
These key risks are reported to the UBC Investment Management Board on a regular basis and are used to support the UBC and SPP boards in their strategic investment decision making process.