Long-Term Investment Objectives

The primary long-term investment objective of the fund is to meet the real rate of return target above the level of Alberta inflation. This target is an essential long-term assumption in determining the funding requirements of the plans to ensure that plan benefits are funded in accordance with the established funding structure. This long-term investment objective is measured starting September 1, 1992, when the plan sponsors agreed to the current funding structure of the plans.

Since September 1, 2004, the long-term rate of return assumption has been 4.25% above the level of Alberta inflation. This target was 4.5% plus inflation from September 1, 1997 to August 31, 2004, 4% plus inflation from September 1, 1994 to August 31, 1997, and 3.5% plus inflation prior to that time.

In the 19 years since September 1, 1992, the investment return of the Teachers’ Pension Plan has surpassed this long-term objective. The annualized rate of return on the fund’s assets over this time period has been 6.9%, which exceeds the 6.6% rate-of-return objective.

Over this same time period, the Private School Teachers’ Pension Plan investment return has been slightly lower, as it did not benefit from the stable return of the loan to the Province of Alberta that was part of the assets of the Teachers’ Pension Plan until the end of 2009. The annualized rate of return for the Private School Teachers’ Pension Plan over the same 19-year time period has been 6.6%, equaling the rate-of-return objective of 6.6%.