Message from the SFPP Board Chair
July 13, 2015
As we look at troubled economies around the world, we are reminded how reactive markets at home can be to financial triggers abroad. News from Europe has been unsettling these past few weeks as Greece and its creditors tried to negotiate a middle ground to provide the debt-laden country with a third bailout from the Eurozone.
Agreement was finally reached July 11, on a debt restructuring package that will avert the collapse of the banking system and restore bridge financing to avoid bankruptcy. But the loan package will mean more austerity measures for the people of Greece, which includes a commitment to streamline pensions, raise tax revenues, change labour practices and increase business activities.
Over the course of the past few weeks we have been hearing from our investment manager, AIMCo (Alberta Investment Management Corporation), that its Investment Strategy and Economics Group has been carefully monitoring the situation with respect to our current portfolio positions. To date, AIMCo has not had to recommend any asset mix changes, so it's business as usual. AIMCo conducted a stress test to determine possible portfolio impacts if Greece were to default and subsequently exit the Euro, but now with a deal on the table, that looks unlikely to happen.
This week's news of a Greek-Eurozone deal will likely result in more stability for markets at home and abroad. It now looks as though any European financial crisis will be averted, which could have had repercussions for us in Canada and for other countries around the globe.
The lesson for SFPP is to continue looking for ways to strengthen our margin to provide an effective cushion against future adverse events over which we have no control. In recent meetings with our sponsors and our actuary, we have discussed ways to increase margin so the SFPP Board has a more effective risk management lever to deal with sudden downturns in the economy. We are also discussing way to provide more equity between members and generations of members in SFPP as we look at strategies to strengthen the financial health of the Plan going forward.
As yet, we have not heard from Alberta's new government on what its priorities are for public sector pensions, but we hope to meet the new Minister of Finance soon to share our ideas for improved governance of the Plan. Please watch the website for updates on these discussions and on our meetings with stakeholders to discuss governance and Plan sustainability.
Please enjoy the rest of your summer and thank you for the job you do each day to keep our communities safe.
Chair, SFPP Board