About the Index
There are no common indices that we believe are suitable for monitoring long-term equity investments in Canadian pension plans.
The ICPP Total Index was designed to provide an independent measure of long-term investment success for the Ideal Canadian Pension Plan’s investment mandate. To create the Index we conducted research over a number of years ending in 2012. We have managed the Index on a go forward basis since then. We established starting points for the Index by backdating the Index from January 1, 2010 to inception, using historical results at that stage. This allowed us to have an Index that initially reflected sufficient and recent market activity to form a reasonable starting point.
The ICPP Total Index is normally comprised of up to 80 companies, split evenly between Canadian (TSX listed) and foreign multinational (US listed). Companies are paired to represent a diverse range of industry groups.
Companies are selected using objective, long-term factors, including size, liquidity, consistent earnings and self-sustaining businesses.
Our research indicated that quarterly rebalancing of the companies in our Index produced the best results.
The Index does not use derivatives or any hedging strategies.
We adopted an external benchmark equal to 50% of the S&P/TSX Total Return Index plus 50% of the Canadian dollar S&P 500 Total Return Index determined monthly for the ICPP Total Index.
In recent years, there have been many articles written about factor-based or “smart-beta” investment strategies that are designed to add value by strategically choosing, weighting and rebalancing the companies built into the Index based on objective factors. Smart-beta describes our process to establish and manage the ICPP Total Index well. While we did not set out to create a smart-beta Index, it turns out we did.
What makes the ICPP Index different than other smart-beta indices are that the objective factors used to design the Index focus on the Canadian economy and on the long-term investment process.
Contact us to learn more.