Investment Beliefs
TTCPP is guided by a set of core principles that inform our investment strategy and the portfolios we implement for the TTC Pension Plan (the Plan).
The investment strategy aims to ensure the Plan's long-term viability by carefully assessing its financial resources and future obligations. Overall, our investment strategy is designed to balance the Plan's financial goals with its long-term sustainability.
We aim to create a strong and resilient portfolio by spreading our investments across different types of assets – such as stocks, bonds and real estate – and working with a diverse array of managers spanning the globe, as well as across different time horizons. This strategic allocation of our assets helps us capture more opportunities for higher returns while minimizing the impacts of any specific risks.
Achieving the best results from our long-term investments requires a willingness to ride out the highs and lows in pursuit of greater returns over time. Effective investment management involves looking at the possible risks linked to various investment choices and creating strategies to reduce the chances of significant losses while trying to make the most of potential gains.
While being mindful of costs associated with investments, our primary focus is on evaluating the returns generated after considering the risks involved and deducting all associated expenses. This approach allows us to assess the true value and effectiveness of our investments. By cutting down on unnecessary costs, we can enhance our investment returns and overall portfolio performance.
When compared to public markets, investments in private markets generally offer the opportunity for greater risk-adjusted returns, albeit accompanied by heightened levels of exposure. This is primarily attributed to two key factors. First, the limited liquidity of private markets yields the potential for greater returns associated with investing in assets that are not easily bought or sold. Secondly, it means operating in less efficient markets where there is less transparency into market prices and values.
Active management involves taking a hands-on approach to making investment decisions, aiming to outperform the market through research, analysis, and expertise. Skilled active managers have shown the potential to consistently generate positive returns (after fees) and improve risk-adjusted performance over multiple cycles.
Conversely, passive strategies can be advantageous where lower costs and broad market exposure are desired.
ESG factors have become increasingly significant in evaluating companies as they can influence the long-term sustainability and success of businesses. By assessing the environmental impact, social responsibility and governance practices of companies, we can identify investments that align with our values and have the potential to deliver positive outcomes in the long run.
Leverage means using borrowed funds to invest and help to optimize the use of capital. When used prudently, it is another lever for liquidity management, risk mitigation or can potentially boost investment results. Yet, it's important to exercise caution and keep leverage within acceptable limits to manage the associated risks effectively. This shields us from the potential negative effects of market volatility. Leverage also assists in managing the amount of funds needed, as it enables you to gain investment exposure using less initial capital.
Rebalancing involves periodically adjusting the allocation of investments in the plan to match our initial targets. As time goes by, market changes can make some investments grow more than others, altering the plan's overall setup.
Currency hedging is a financial strategy used by investors to mitigate the potential risks associated with currency exchange rate fluctuations. It can significantly impact the performance of your investments in foreign money. Unlike other investments, currency itself doesn't provide returns like interest or earnings growth. However, you can use currency hedging to substantially lower the risk that your money's value will change because of differences in exchange rates.
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