Sure and Steady.

Provident¹⁰ takes great pride in having the trust of its members. To provide a secure retirement future for these members, the investment team carefully manages the PPSP Fund. The Fund is a pool of assets made up of contributions from members, matching contributions from employers, and the investment earnings from these contributions.

The objective for the total fund is to meet a benchmark portfolio return that is established every four years consistent with the Statement of Investment Policies and Procedures (SIP&P). Despite fluctuating markets throughout 2020, Provident¹⁰ ended the year with an 11.9% return on investments.

There is no substitute for attracting, developing, and retaining the best people possible.

An assessment of Provident^10’s recruitment strategy was completed in 2020. The project was initiated with the goal of transforming a traditional recruitment strategy into one that is modern, diverse, inclusive, and aligned with industry standards. The outcome provided strategies to promote the Provident¹⁰ brand and position the organization as an employer of choice.

A key element in recruiting and retaining the right talent is the organizational culture. Provident¹⁰ continues to promote a strong workplace culture and is continuously exploring opportunities to further enhance its offerings for employees. The organization remains committed to learning and development as a core aspect of Provident¹⁰’s workplace culture. In 2020, standardized learning modules, including the general retirement framework in Canada, operations of Canadian registered pension plans, and a focus on defined benefit plan’s benefits and tax matters were implemented in collaboration with an external partner. Provident¹⁰’s learning and development policy ensures that each employee has access to opportunities that align with corporate initiatives, operational requirements and individual development.

Website enhancements, Retirement Ready Modules, and new member resources push the Provident¹⁰ brand further. In 2020 the organization saw an 11% increase in website users, which included 29,990 new visitors to provident10.com.

With 40 Participating Employers, Provident¹⁰ is focused on finding opportunities to partner on educational initiatives to enhance engagement and transfer knowledge of the PSPP. Provident¹⁰ recently launched Employer Information Sessions, called Asked & Answered. Rollout of the virtual sessions will take place throughout 2021 and offer an opportunity for both Provident¹⁰ and Participating Employers to further enhance member relations.

All successful organizations identify and act on opportunities for growth. Provident¹⁰ is focused on building partnerships that optimize business practices and maximize efficiencies.

In 2020, a new Participating Employer Onboarding Team was established, and a path developed and implemented to complete onboarding for new Participating Employers. The team provided support and welcomed two new employers in 2020.

Data security is a top priority in an increasingly digital world. Maintaining the integrity of the IT and security infrastructure is therefore critical to protecting the information of our Participating Employers, members, and our business partners. Accordingly, a multi-year Security Improvement Program has been a priority for the Systems and Quality team over the last three years. The program has improved Provident¹⁰’s security posture in the areas of threat management and education and will remain a key area of focus into the future.

Consistent Service Standards

"Despite the changing dynamics of the pandemic and a steady increase in inquiries throughout 2020, the Pension Administration team ensured our members remained at the heart of everything we do. Their dedication never faltered and they worked diligently to ensure our operational service standards were achieved. I'm incredibly proud of the team's commitment to providing service excellence to our members, especially during a year that was full of much challenge and change."

- Jason Durdle, Director, Pension Administration

Provident¹⁰ is focused on enriching the member experience through consistent service standards across the organization. The service standards keep Provident¹⁰ on track in responding to member enquiries in a timely manner, while still ensuring members receive the quality of service and information they need. In 2020, the Pension Admin team processed over 4,000 member transactions and responded to over 35,000 inquiries.

For each inquiry and process of service, Provident¹⁰ strives to uphold the following service standards:

On average, in 2020, Provident¹⁰ exceeded the targeted service standards. Though Provident¹⁰ was not able to fully obtain every target for all service processes, the team continues to prioritize retirement pensions, ensuring members can transition as seamlessly as possible to retirement. 2020 brought its unique challenges, including the end of the transition period for pre-reform and post-reform pension eligibility rules. Due to this, the team saw a 24% increase in purchase of service requests which resulted in higher volume for the first quarter of 2020. Provident¹⁰ will continue to look for ways to improve its processes and reduce turnaround time on all requests.

Plan Text Update

Provident¹⁰’s planning and preparedness activities ensured readiness to manage the switch to Non-Statutory Plan Text, which was proclaimed on February 14, 2020.

The adoption of the Plan Text will help Provident¹⁰ to administer the PSPP more efficiently on members' behalf and will have little effect on Plan members. Almost all aspects of the PSPP remain the same, including contributions and benefits. As a part of the introduction of the Plan Text, a new Appeals Process and Procedure, which can be viewed online under Forms & Resources, has been established.

Along with the implementation of the Non-Statutory Plan Text, ten new policies were developed, implemented, and communicated that reflected the largest volume of transactions. Five Independent Appeal Commissioners were also appointed to a roster under the appeal policy through individual agreements.

Corporate Communications

Communicating with Participating Employers and Unions is critical for success and helps ensure Plan members are well informed.

Corporate communications, operational enhancement and engagement, and regulatory requirements or process changes are the targeted areas of focus for communications with Participating Employers and Unions.

In 2020, employer communication efforts were primarily centred on the conclusion of the pension reform transition period, process updates, non-statutory plan text implementation, lifecycle education, business continuity preparedness, new medical advisory services, and upcoming Asked and Answered webinars. As Provident¹⁰ continues to enhance the member experience, employer engagement will be a key element in the future success of the organization.

Digital Transition

We live in a digital world, and the COVID-19 pandemic has only made that more obvious.

To keep up and provide exemplary service, Provident¹⁰ has transitioned to accepting virtually completed and submitted forms from our Participating Employer partners. This helps to increase efficiencies internally and time required for potential follow-up.

Provident¹⁰ has also updated two commonly used forms to better identify and monitor the processing of members who are retiring or terminating from the Plan.

The announced Asked and Answered Sessions will provide Participating Employer partners the opportunity to gain additional insight into the latest pension processes and is also a way for Provident¹⁰ to collect valuable feedback from Participating Employer and Union Partners.

Provident¹⁰ will continue to work collaboratively with Participating Employers and will invite, monitor, and reply to feedback on procedures and processes as services evolve.

2020 Year in Review – Fund and Asset Classes

The Plan's portfolio is measured by two key metrics. The primary objective is to generate a long-term return on invested assets that exceeds the Funding Policy's discount rate of 6%. This is the rate established in the Funding Policy. The secondary objective is to outperform the return of the Policy benchmark. This outperformance is termed ‘added value’ and allows for the evaluation of the effectiveness of the investment strategy and its implementation at the total Fund level. Benchmarks are valuable tools Provident¹⁰ uses to measure performance of individual asset classes and the managers who invest in them on Provident¹⁰’s behalf.

Total Net of Fees CAD $ Returns

1.Weighted approximation return calculation.

For the year ending December 31, 2020, the Fund netted a total return of 11.9%, compared to the policy benchmark return of 9.2%, realizing 2.7% of added value. Provident¹⁰ uses a thorough and rigorous risk-controlled approach by choosing an optimized risk level within a multi-year framework and with the selection and weighting of asset classes to achieve a target return. In simple terms, the amount of acceptable risk is identified, then the mix of assets is determined to give the best chance to achieve the goal.

The Equity portfolio is made up of both Canadian and Global public and private equity asset classes. The public equities represent a large cross segment of developed and emerging markets diversified throughout multiple economic sectors. For 2020, Global Equities provided the greatest results, delivering the Plan a return of 21.4%, compared to the associated benchmark return of 14.2%, for added value of 7.2%. Canadian Equities, while providing a lower total return, nevertheless contributed 7.8% to the Fund performance, which represents 2.2% added value.

The Private Equity allocation is a combination of direct investments in private companies and funds. An allocation to Private Equity expects to provide a higher return, albeit with a lower risk level than the public Global Equity markets. Private Equity delivered a return of 20.1% and added value of 3.9%. Fixed Income and Infrastructure are asset classes intended to protect the Fund portfolio during periods of market stress. In an environment of declining rates, Fixed Income generated a return of 9.2% for the year; that is, 0.5% of value achieved over the benchmark. While the asset class is comprised of a sizable portion of Canadian government and corporate issuers, it also includes Global Credit investment. The latter provides exposure to faster growing economies operating within a different interest rate regime than Canada. Provident¹⁰’s international credit exposure provides an attractive risk-return balance for the portfolio. Over the past year, the Global Credit portion of the portfolio earned a return of almost 12%.

Infrastructure, both listed and private, provides diversification and some level of inflation protection for the Fund. The holdings consist of listed and private companies as well as infrastructure funds. The asset class achieves diversification through both geographic and industry sector coverage. Private Infrastructure produced a return of 9.2% compared to its benchmark 6.0%. Listed Infrastructure earned an approximate return of -6.2%, also performing above the benchmark.

Real Estate suffered from the pandemic more than other asset classes and difficulties persist for specific sectors including commercial offices and retail properties located throughout Canada. During the year, Provident¹⁰ focused significant attention to better understand key valuation measures and risks resulting from the pandemic. Challenges in the asset class were evident with a limited return of 0.3%.

Commercial Mortgages offer dual advantages over some other forms of fixed income instruments such as corporate bonds including illiquidity premiums and direct claims on a tangible asset. The historical sustainability of the Canadian mortgage market was further validated during the pandemic with no recorded default or impairments in holdings.

Historically, the Plan has been able to provide its members a robust rate of return over time.

Total Fund Performance

Net return as of December 31, 2020

The most important aspect of the Provident¹⁰ investment portfolio is selecting the appropriate strategic asset mix to provide investment returns that, over time, exceed the Funding Policy's discount rate of 6%. This rate is critical to the Plan. It is the percentage used to value the current cost of future pension obligations, improve the Plan’s funded status, increase the probability of reaching full funding by 2045, and enhance downside protection.

During the past year, the strategic asset mix saw limited changes. Focus was on enhanced monitoring and scrutiny of investments in all asset classes considering COVID-19 impacts. That said, the Plan’s new strategic asset mix implementation continued to progress. A search for both a Private Debt and Hedge Fund advisor was completed, and additional investment was made in low volatility equity with the intention to provide greater downside protection to the Fund.

In 2021, Provident¹⁰ expects the investments in the new asset classes to commence and continue over several years. The implementation will emphasize higher expected return asset classes, albeit within a rigorous risk control framework.

"What a year it was. Fundamentally, it was a tale of two distinct outcomes. It began with a period of severe market declines during the first quarter to outright euphoria in some asset classes for the remainder of 2020." - Michel Malo, Chief Investment Officer

Following attractive 2019 results for most asset classes and a positive beginning to the new decade, the arrival of the pandemic shocked global markets with significant double-digit equity declines in the first quarter. Fixed Income functioned as a cushion and provided some much-needed positive return. In both Canada and globally, all equity sectors recorded negative returns. The most adversely impacted were the more economically sensitive sectors including Energy, Materials, and Real Estate. In addition, and as expected, Consumer Discretionary stocks around the world suffered as did commodity prices. Energy-related commodities experienced return declines over 50% from their US dollar denominated price. The Canadian dollar declined by 7.7% and 6.1% against the US dollar and the Euro respectively owing to its key exposure in both Energy and Materials.

By the end of the first quarter, many of the World’s equity markets reached bottom and began a remarkable recovery that extended throughout the remaining three quarters of the year. Both the S&P 500 and MSCI AC World Index concluded 2020 with double-digit returns. Canadian equity markets, despite being negatively impacted by a bleak energy sector and limited Information Technology exposure, achieved a return of 5.6%.

Fixed Income, in Canada and around the world, managed to earn attractive single digit returns. The best performing Canadian fixed income sectors were Municipal and Provincial bonds with a return of 10.1% and 9.9% respectively. Corporate bonds provided a return of 8.7%. Within this backdrop of increased economic optimism, the Canadian dollar recovered to achieve a modest positive return against the US dollar.