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.

Over the past 17 years, since September 1, 1992, the investment performance of the Teachers’ Pension Plan has surpassed the long-term objective. The annualized rate of return on the fund’s assets over this time period has been 6.9%, which exceeds the 6.7% rate of return objective by 0.2% per year.

The investment performance of the Private School Teachers’ Pension Plan has been slightly lower, as it has not had the benefit of the stable return from the loan that is part of the assets of the Teachers’ Pension Plan. As a result the annualized rate of return on that fund’s assets over the same time period has been 6.6%, which is very slightly below the rate of return objective of 6.7%.