Key Takeaways
- • Saskatchewan's Public Employees Pension Plan (PEPP) has integrated alternative investments into its defined contribution plan structure, offering members daily liquidity while accessing private equity and infrastructure opportunities typically reserved for defined benefit plans.
- • PEPP targets an 11% total alternatives allocation (8% infrastructure, 3% private equity) across its ~70,000-member portfolio of $11 billion in assets under management, significantly more aggressive than its companion DB plan's initial allocations.
- • The Public Employee Benefits Agency (PEBA), which oversees both PEPP and the Municipal Employees Pension Plan (MEPP), is building a combined $2-billion alternatives portfolio across both plans, leveraging the MEPP's two decades of alternatives experience dating back to 2005.
- • PEPP began its alternatives program in 2017/18 with board approval and made first investments by mid-2020, demonstrating a rapid deployment strategy compared to the MEPP's gradual approach, which started with concentrated allocations to just two infrastructure managers.
- • The plan diversified beyond its traditional Canadian real estate base into global real estate and added multiple alternative asset managers, with Fengate Asset Management hired effective May 31, 2022 to manage an additional 10% infrastructure allocation.
Summary
Saskatchewan's Public Employees Pension Plan has successfully embedded alternative investments into its defined contribution pension architecture, creating a hybrid model that combines the risk-diversification benefits of alternatives with daily liquidity features essential to DC plan participants. According to Gary Hutch, executive director of investment services for the Public Employee Benefits Agency, the strategy draws on the proven track record of PEPP's companion defined benefit plan, the Municipal Employees Pension Plan, which has invested in alternatives since 2005.
The PEPP, which serves approximately 70,000 members and manages roughly $11 billion in assets, launched its alternatives initiative following a strategic review in 2017/18, with initial investments deployed by mid-2020. The plan's target allocation reaches 8% for infrastructure and 3% for private equity—a substantially more aggressive posture than the MEPP's initial approach. The MEPP began with a 5% infrastructure allocation distributed across just two managers; by 2017/18, it had grown to 20% infrastructure and 5% private equity. PEPP distinguished itself through greater diversification from inception and broader manager selection, reflecting lessons learned from the MEPP's decades-long alternatives experience.
The broader PEBA organization has established a $2-billion combined alternatives portfolio target across both PEPP and MEPP, signaling institutional commitment to non-traditional asset classes. The strategy extended beyond private equity and infrastructure; PEPP expanded its traditional Canadian real estate allocation into global real estate markets to achieve comprehensive alternatives exposure. As of May 2022, PEPP added Fengate Asset Management to manage an additional 10% infrastructure allocation, demonstrating active manager scaling consistent with the plan's deployment timeline.
The DC plan structure itself comprises 30 underlying investment mandates organized across equity, alternatives, and fixed-income categories, allowing members varying risk exposures while maintaining consistent exposure to alternative return streams. This architecture addresses a fundamental challenge in DC pension design: delivering institutional-quality diversification while preserving the liquidity and flexibility required by individual participants withdrawing or reallocating between funds.
The PEPP, which serves approximately 70,000 members and manages roughly $11 billion in assets, launched its alternatives initiative following a strategic review in 2017/18, with initial investments deployed by mid-2020. The plan's target allocation reaches 8% for infrastructure and 3% for private equity—a substantially more aggressive posture than the MEPP's initial approach. The MEPP began with a 5% infrastructure allocation distributed across just two managers; by 2017/18, it had grown to 20% infrastructure and 5% private equity. PEPP distinguished itself through greater diversification from inception and broader manager selection, reflecting lessons learned from the MEPP's decades-long alternatives experience.
The broader PEBA organization has established a $2-billion combined alternatives portfolio target across both PEPP and MEPP, signaling institutional commitment to non-traditional asset classes. The strategy extended beyond private equity and infrastructure; PEPP expanded its traditional Canadian real estate allocation into global real estate markets to achieve comprehensive alternatives exposure. As of May 2022, PEPP added Fengate Asset Management to manage an additional 10% infrastructure allocation, demonstrating active manager scaling consistent with the plan's deployment timeline.
The DC plan structure itself comprises 30 underlying investment mandates organized across equity, alternatives, and fixed-income categories, allowing members varying risk exposures while maintaining consistent exposure to alternative return streams. This architecture addresses a fundamental challenge in DC pension design: delivering institutional-quality diversification while preserving the liquidity and flexibility required by individual participants withdrawing or reallocating between funds.
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