The investment team for Air Canada's C$21 billion ($15.9 billion) portfolio have taken a novel approach to remain in growth mode as the pension plans continue to derisk.
The 65-person team, formerly known as Air Canada Pension Investments, now manages money under a new entity, Trans-Canada Capital Inc., according to Vincent Morin, president of Montreal-based TCC. The firm operates as an investment manager, allowing the team to manage external clients' assets.
The team is half composed of investment staff, which internally manage about 80% of Air Canada's portfolio, with the other half including individuals in operations, accounting and other roles, Mr. Morin said. All ACPI team members transferred to TCC on Jan. 1, he added.
The launch of TCC comes as Air Canada seeks regulatory approval to form its own life insurance company, which would position the team to also manage insurance assets as Air Canada looks to buy annuities to offload pension liabilities.
Air Canada aims to annuitize about C$10 billion of its total portfolio, Mr. Morin confirmed. Buying annuities from a new Air Canada insurance company would essentially transfer assets and liabilities to one entity from another but would allow TCC to retain the assets under management, Mr. Morin said.
TCC is currently focused on managing Air Canada's pension assets as well as the assets of other institutional investors. But in the future, the money manager might offer its services to retail clients "when the time is right," Mr. Morin said.
Air Canada administers eight defined benefit plans that are all closed to new entrants, excluding three plans that are offered as a "hybrid structure combining a DB and DC component," Mr. Morin said.
Air Canada's request to create a life insurance company is still under review by the Office of the Superintendent of Financial Institutions, though the company hopes for approval in the next few months, he said.
In August 2018, Air Canada announced it would create a life insurance company, noting that the large size of the pension fund "dwarfs the ability of the Canadian annuity market to absorb such a large investment and the associated risk," Christopher Hiscock, chairman of the International Association of Machinists and Aerospace Workers Air Canada pension committee, wrote in a memo to IAMAW union members at the time.