TORONTO -- The University of Toronto is creating a separate investment management corporation to oversee its C$3.5 billion (U.S.$2.4 billion) in pension, endowment and operating assets.
In the future, the group might manage money in-house, said Robert White, chief financial officer.
The University of Toronto Investment Management Corp. should be up and running by June, Mr. White said.
The corporation is close to hiring a chief executive officer, who also will be the fund's chief investment officer. Two portfolio managers are likely to be hired as well. The portfolio managers will keep a close eye on money managers. "We want some qualified staff to ride herd" on the managers, Mr. White said. Plans call for hiring up to six people.
Robert Korthals is chairman of the board of directors for the new investment company. Mr. Korthals, the retired president of Toronto Dominion Bank, had been chairman of the university's investment committee.
Mr. Korthals also is chairman of the board of directors of the C$60 billion Ontario Teachers' Pension Plan.
Investment policy for the new corporation will be approved by the university's business board of governing counsel, based on recommendations from executives at the new subsidiary, Mr. White said.
The university has a C$1 billion endowment and a C$2 billion defined benefit plan. The endowment has a 70% weighting to equities and 30% to fixed income, while the pension plan has a 60%-40% split between stocks and bonds. Half of its total assets are passively managed, he said.
Currently, the treasurer's office, with about a dozen investment staff, oversees the university's close to 20 money managers. They, in turn, form an investment committee that reports to the university president.
The move to create a separate subsidiary is being made in part to improve investment performance.
Operating as a corporation rather than as an investment committee was important, Mr. White said. U.S. universities with separate asset management arms -- such as Duke Management Co. in Chapel Hill, N.C. -- served as examples, he said.
The president and CEO of the new corporation will be able to make tactical decisions and move more quickly on investing, he said. In the past, the university has "sometimes missed the mark" on investments such as alternatives, he said.
Improving the funds' ability to compete and pay for investment management talent was another important reason to form the subsidiary, Mr. White said.
"Investment management professionals cost a lot of money," he said.
The university had been "relying heavily on the investment committee to make decisions," he said. "We came to the conclusion that we needed better staff."
Staff, at first, will not run any money. That could change. "We might do bonds in-house," he said. All of the university's bonds are run by passive managers.
The president of the new company will handle reviewing money managers in the future, he said. Currently, managers are reviewed by the investment committee. The goal is to find out "the right number" of managers for the fund.
University of Toronto Investment Management also might move into alternative investments such as private equity, he said. The fund "may move into that area in cooperation with others," he said.
For example, University of Toronto could buy a small piece of a deal that a larger pension fund is pursuing, he said.
Faculty, meanwhile, are pushing to change their pension plan to defined contribution from defined benefit. The plan is fully funded and has a surplus of C$350 million on an ongoing basis.
The university hasn't made a contribution to the pension plan in 12 years, said Lloyd Gerson, vice president, salary benefits and pensions, University of Toronto faculty association.
A point of contention between staff and University of Toronto Investment Management could be the control of the surplus, said Mr. Gerson. A change to a defined contribution plan would lead the university to budget about C$25 million per year to the retirement program, he said.
The university "hasn't decided if we're going to respond" to the staff's proposal to create a defined contribution plan, Mr. White said. He added a key factor was that the staff was in the first year of a three-year contract.