Investment policies

A blueprint for our investment strategy

Statement of Investment Policies and Procedures

The CAAT Plan's investment policies are documented in its Statement of Investment Policies and Procedures (SIPP), which serves as a blueprint for our investment strategy, outlining our investment goals, beliefs and philosophy. Among other things, the SIPP details the asset mix policy and permitted investments, as well as the long term return expectation and the Plan’s approach to responsible investment.

Investment principles

The SIPP also outlines the investment principles that guide the investment and risk management of the assets in the fund. These investment principles are:

Liability Hedging / Matching

To meet the goals of stable contribution rates and securing retirement income, the investment policies that govern the Fund should take into account the behaviour and sensitivities of the Plan’s liabilities.

Perfectly matching or immunizing the Plan’s liabilities is rarely achievable in practice because:

  1. Estimating the value and risk profile of the liabilities relies on many assumptions about member demographics that are altered frequently, as well as economic factors such as interest rates and inflation;
  2. The value of the liabilities also varies with the discount rate which is in part driven by expected returns of the asset classes in the Fund and by the risk tolerance of the Plan’s governors; and
  3. Fixed income instruments, such as long duration bonds and real return bonds, that help to hedge the economic risks, but not longevity or salary escalation risks, and may not be available in the Canadian market in the form and quantities required (although use of derivative instruments such as swaps may be of help).

Closer matching of assets to the liabilities may be achievable, but it may cause contribution rates to go above an affordable level.

Asset Categories

Assets in the Fund are divided into three broad categories: interest rate sensitive, inflation sensitive and return enhancing.

Interest Rate Sensitive and Inflation Sensitive asset classes help to hedge the economic exposures to interest rates and inflation in the Plan’s liabilities. Return Enhancing asset classes provide the opportunity for long-term enhanced returns and diversification in managing contribution rate volatility. Several asset classes in which the Fund invests have characteristics and risk factors that fit into more than one of these categories.

Asset Mix / Risk Tolerance

The level of equity exposure will drive much of the risk level of the Fund assets relative to the liabilities and will vary depending upon the risk tolerance of the Board.

The risk tolerance of the Board will be influenced by the funded status of the Plan, as well as the priorities defined in the Funding Policy.


Strategies that access different sources of return and / or increase portfolio diversification will be pursued in the expectation of enhanced long-term risk-adjusted returns. This includes the diversification of asset classes and risks as well as the diversification of sources of added value or alpha.

Equity Risk Premium

While there will be periods of equity underperformance, it is expected that equity investments will outperform bond investments over the long term.

Currency Hedging

While returns associated with non-Canadian currency movements relative to the Canadian dollar are not expected to have a significant effect on the return of the CAAT Plan over the very long term, over shorter periods, currency movements may cause returns to be volatile. Hedging will be employed for certain non-Canadian currency exposures.

Active / Passive Management

Active management is employed for those strategies where there is an expectation of adding value relative to a benchmark over the long term net of expenses.

All active management activities are carried out within defined parameters. Active management performance is measured against appropriate absolute or relative benchmarks and relevant asset class peer groups.

Passive investment management may be used in certain asset classes where the prospects of adding value are diminished based on market efficiency or limited opportunity or in managing the level of active risk exposures within asset classes.

Time Horizon / Liquidity

While the Plan’s liabilities are long-term in nature, the requirement to file valuation results with the regulator every three years (which in turn can drive contribution levels) means the investment horizon of the Fund has to be balanced between the relatively short term and the long term. The ability to smooth asset values and to work within a range of acceptable valuation assumptions helps to extend the investment horizon of the Fund.

The long-term nature of the Plan’s liabilities allows for a material portion of the assets in the Fund to be invested in illiquid assets. Investment in illiquid assets such as infrastructure, real estate or private equity shall be implemented for those investments where there is expected to be additional return available due in part to an illiquidity premium.


Leverage, defined as the use of non-cash backed derivative instruments or borrowed capital to increase the expected rate of return received from investment activities, to manage liquidity or to manage risk, may be used in defined and controlled circumstances as permitted by applicable law and approved by the Board.

Non-Canadian Investments

Financial assets in Canada represent a very small segment of global market capitalization and are concentrated by industry sector and geographically. While there may be reasons for the Plan to hold Canadian investments in excess of their global market weight within a particular asset class, global diversification of investments is beneficial to the Plan and will be employed.

Responsible investing

The CAAT Plan Board believes that, as part of its fiduciary duty to Plan beneficiaries, consideration of risks related to the investment of the Plan’s assets includes non-financial risks such as environmental, social and governance (ESG) factors. Learn more about the Plan’s approach to responsible investing.

Statement of Investment Policies and Procedures
Download the statement (PDF)