Module 8

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What is the primary document governing a pension plan's investment program?

Financial Risk Assessment Report (FRAR)

Statement of Investment Policies and Procedures (SIPP) (correct)

Investment Portfolio Summary (IPS)

Pension Investment Strategy (PIS)

Which of the following is NOT typically included in a pension plan's Statement of Investment Policies and Procedures (SIPP)?

Income tax filing requirements (correct)

Asset allocation and risk tolerance

Objectives and constraints

Governance and reporting requirements

In which Canadian province is a written Statement of Investment Policies and Procedures (SIPP) NOT mandated for pension plans?

Quebec

Prince Edward Island (PEI) (correct)

Ontario

Alberta

How often are administrators required to review and amend the SIPP for Defined Benefit (DB) or administrator-directed Defined Contribution (DC) plans according to Canadian pension legislation?

Annually Signup and view all the answers

Which entity recommends the content to include in a pension plan's Statement of Investment Policies and Procedures (SIPP) as a standard of good practice for registered pension plans?

Office of the Superintendent of Financial Institutions (OSFI) Signup and view all the answers

What aspect of a pension plan's SIPP does the process for decision approval and implementation address?

Responsibilities clarification Signup and view all the answers

What is the definition of 'alpha' in investment returns?

Return on investment portfolio that exceeds the market return Signup and view all the answers

According to the Efficient Market Hypothesis, what does alpha result from?

Random chance Signup and view all the answers

What are some reasons for terminating an investment manager?

Failure to meet performance metrics Signup and view all the answers

In pension plans, what are common types of investments represented?

Pooled vehicles, stocks, real estate Signup and view all the answers

What is a key characteristic of bonds?

Specific maturity dates that normally pay interest until maturity Signup and view all the answers

How do pooled funds operate in pension plans?

Pool contributions to purchase units Signup and view all the answers

What distinguishes the balanced investment management approach from the specialist approach?

Balanced approach uses a balanced manager overseeing different asset classes Signup and view all the answers

What is the maximum ownership limit in terms of shares eligible to elect a board according to federal pension standards legislation?

30% Signup and view all the answers

What is the cap on investments in any single entity under federal pension standards legislation?

10% Signup and view all the answers

Under the federal PBSA, for related-party transactions, when can the transaction value be deemed nominal by the plan administrator?

When it is below $10,000 Signup and view all the answers

What must a DB pension plan SIPP disclose in terms of investment categories under the federal PBSA?

Derivatives, Options, and Futures only Signup and view all the answers

What aspect of asset mix should be outlined in a DB pension plan SIPP according to the federal PBSA requirements?

Expected portfolio rate of return Signup and view all the answers

Under the federal PBSA requirements, what is one of the considerations for lending cash and securities?

Maximum exposure limits Signup and view all the answers

What factor should a DB pension plan administrator consider regarding the response of liabilities and investments to economic events when preparing a SIPP?

Fluctuations in interest rates Signup and view all the answers

What type of employment changes can impact retirement patterns and should be considered when developing a statement of investment policy for a DB pension plan SIPP?

Salary reductions or freezes Signup and view all the answers

What is a key benefit of alternative investments according to the text?

Potential for higher returns due to efficient and liquid markets Signup and view all the answers

Why is valuation and performance measurement considered a challenge in alternative investments?

Objective methods to determine fair value in infrastructure and private equity Signup and view all the answers

What is one factor that plan administrators should consider when choosing investment options for a non-pension Capital Accumulation Plan (CAP) plan?

Variety of investment options to meet members' needs Signup and view all the answers

What is a common risk associated with alternative investments?

Short histories and lack of robust data for alternative assets Signup and view all the answers

Which activity is NOT a component of investment manager monitoring?

Evaluating investment manager's communication skills Signup and view all the answers

Why do assets like commodities serve as inflation-hedging assets in alternative investments?

Aligning with inflationary benefit promises Signup and view all the answers

What is the purpose of a request for proposal (RFP) for the selection of a pension fund investment manager?

To expand due diligence scope beyond past performance Signup and view all the answers

What role does leverage commonly play in alternative investments?

Common use of leverage in alternative investments for additional gains Signup and view all the answers

What should be defined in the mandate when selecting an investment manager?

Manager's responsibilities and acceptable vehicles Signup and view all the answers

What is a significant challenge posed by regulatory variability in alternative investments?

Potential differences in regulations for alternative asset managers by location Signup and view all the answers

Which metric assesses the dispersion of returns in a portfolio?

Standard deviation Signup and view all the answers

What is NOT an example of a monitoring metric used in investment manager activities?

Return on Equity (ROE) Signup and view all the answers

'Assessing success in meeting objectives' is a component of which activity related to investment manager monitoring?

Manager's performance evaluation Signup and view all the answers

'Develop Scoring Systems' is a step involved in the selection of an investment manager. What is its purpose?

Establishing comprehensive scoring based on gathered data Signup and view all the answers

'Meet Manager Constraints' is a crucial step in selecting an investment manager. What does it involve?

'Identifying any limitations early to streamline the selection process Signup and view all the answers

What does the 'Target asset allocation' provide information about?

Description of the desired distribution of assets Signup and view all the answers

What is the main difference between active and passive fund management?

Active management involves actively buying, holding, and selling securities, while passive management mirrors market indexes. Signup and view all the answers

Which type of risk arises when the market value of investments fluctuates due to interest rate changes?

Interest Rate Risk Signup and view all the answers

What is the primary focus of liability-driven investing (LDI) in managing pension plan risk?

Aligning asset returns with liabilities Signup and view all the answers

Which strategy best defines responsible investing (RI)?

Integrating ESG factors in investment selection and management Signup and view all the answers

What do private equity investments typically involve?

Providing capital to non-publicly traded enterprises Signup and view all the answers

In hedge funds, which type focuses on companies involved in significant corporate transactions?

Event-driven funds Signup and view all the answers

What is the goal of relative value funds in hedge funds?

To exploit price discrepancies between related securities Signup and view all the answers

Which type of investments include energy, agricultural, industrial, and precious metals?

Commodities Signup and view all the answers

Which risk arises when the market value of investments changes not matched by corresponding liabilities?

Mismatch Risk Signup and view all the answers

What is the primary aim of Liability-Driven Investing (LDI)?

To preserve funded position of the plan over time and assist in cash flow planning or plan wind-up. Signup and view all the answers