Statement of
Investment Policies
and Procedures for
Ontario Teachers’
Pension Plan (“SIPP”)
Registration Number: 0345785
February 28, 2024
Ontario Teachers' Pension Plan
Table Of Contents
Section 1 Purpose 1
1.1 Description of the Ontario Teachers' Pension Plan 1
1.2 Description of the Ontario Teachers' Pension Plan Board 1
1.3 Purpose of the SIPP 1
Section 2 Fund Governance 2
2.1 Responsibilities of the Board 2
2.2 Management’s Responsibilities 2
2.3 Custodian’s Responsibilities 2
2.4 Code of Conduct 2
2.5 Responsible Investing 2
Section 3 Plan Overview and Investment Implications 3
3.1 Nature of the Plan 3
3.2 Pension Entitlement 3
3.3 Pension Formula and Indexation 3
3.4 Funding 4
3.5 Plan Changes 4
3.6 Solvency 4
3.7 Plan Maturity 5
3.8 Long-Term Rate of Return Goal 5
Section 4 Investment Parameters 5
4.1 Investments and Investment Strategies 5
4.2 Diversification 6
4.3 Liquidity 6
4.4 Asset Mix 6
Section 5 Risk Management Tools 7
5.1 Asset/Liability Studies 7
5.2 Asset Mix 7
5.3 Benchmarks 8
5.4 Risk Metrics 8
5.5 Derivatives and Repurchase Agreements 8
5.6 Risk Appetite and Investment Policy 8
Section 6 Related Party Transactions 9
Section 7 Lending of Cash and Securities 9
7.1 Permitted Circumstances 9
7.2 Use of Agents 9
7.3 Collateral and Margin Requirements 9
Section 8 Short Selling of Securities 10
8.1 Permitted Circumstances 10
8.2 Collateral and Margin Requirements 10
Ontario Teachers' Pension Plan
Section 9 Pledging and Borrowing Assets 10
9.1 Permitted Pledging 10
9.2 Permitted Borrowing 10
Section 10 Voting Rights 11
10.1 Value of Voting Rights 11
10.2 Proxy-Voting Guidelines 11
10.3 Reports of Voting 11
Section 11 Valuation of Investment Assets and Liabilities 11
11.1 Frequency of Valuation 11
11.2 Fair Value 11
11.3 Where Observable Inputs are Not Available 11
Section 12 The Effect of Expenses on Performance 12
Section 13 Compensation of Managers 12
Section 14 Delivery to Actuary 12
Section 15 Statement Review 12
Ontario Teachers' Pension Plan 1
Section 1 – Purpose
1.1 Description of the Ontario Teachers' Pension Plan
The Ontario Teachers' Pension Plan (the "Plan") is governed by the Teachers' Pension Act as amended (the
"TPA"). It is a contributory, defined benefit pension plan co‐sponsored by the Ontario government (the
“Province”) and the Plan members, who are represented by Ontario Teachers’ Federation (“OTF”). The
Province and OTF will be referred to as the “Partners”.
The terms of the Plan are set out in the plan document, Schedule 1 to the TPA, as amended from time to time.
Active members of the Plan are persons employed in education as defined in the Plan. Most persons who are
employed in education on a full‐time or part‐time basis are required to become active members of the Plan
and to contribute to the pension fund (the “Fund”)
1
.
1.2 Description of the Ontario Teachers' Pension Plan Board
The Plan is administered and the Fund is managed by the Ontario Teachers' Pension Plan Board (the
“Board”). Under the TPA, the Board is constituted as a corporation without share capital to which the
Corporations Act does not apply. The Partners appoint a maximum of eleven individuals to serve as board
members.
1.3 Purpose of the SIPP
The Board has prepared this statement of investment policies and procedures (the “SIPP”)
2
to address the
manner in which the Fund shall be invested. Investments shall be selected and held in accordance with the
criteria and limitations set forth herein and in accordance with all relevant legislation.
1
The Plan covers all people employed in education as described in Part II of Schedule I to the TPA.
2
In accordance with section 78 of regulation 909 promulgated under the Pension Benefits Act (Ontario) (“Regulation 909”).
Ontario Teachers' Pension Plan 2
Section 2 – Fund Governance
2.1 Responsibilities of the Board
The Board is responsible for the overall management of the Fund. In fulfilling its responsibilities, the Board
may delegate certain duties and responsibilities to committees of the Board (“Committees”) and to the
President and Chief Executive Officer with the power to sub‐delegate. The Board shall supervise the
President and Chief Executive Officer, the Chief Investment Officer, Asset Allocation, and the Chief
Investment Officer, Public and Private Investments (collectively, “Management”) and establish or require to
be established by Management, written investment policies and procedures including this SIPP. The Board,
its delegates and the sub-delegates shall exercise the degree of care, diligence and skill in the investment of
the Fund that a person of ordinary prudence would exercise in dealing with the property of others. In doing
so, they shall use all relevant knowledge and skill that they possess or, by reason of their profession, business
or calling ought to possess.
2.2 Management’s Responsibilities
Management shall be responsible for the day-to-day operations of the Fund, including adherence to Board
policies and guidelines and supervision of employees and agents.
2.3 Custodian’s Responsibilities
The Custodians appointed by the Board shall perform the duties required of the Custodians pursuant to
written agreements entered into from time to time with the Board and any applicable regulation
3
.
2.4 Code of Conduct
The Board members, Committee members and all employees shall adhere to the Board’s Code of Conduct.
2.5 Responsible Investing
The consideration of risk factors such as environmental, social and governance (“ESG”) that may have an
impact on the financial performance of the Fund is consistent with the Board’s objective to meet the pension
liabilities of the Plan over the short and long-term horizons, based on current Plan provisions.
Alongside financial, economic, and other risks, the Board weighs relevant risks posed by ESG factors on the
value of the Fund over both short and long-term horizons. The Board recognizes that there may be
jurisdictions, markets, sectors or companies where the associated risks, including risks posed by ESG factors,
outweigh the benefits to the Fund.
3
See section 78 of Regulation 909 and section 6(2) of the Pension Benefits Standards Regulations.
Ontario Teachers' Pension Plan 3
Section 3 – Plan Overview and
Investment Implications
3.1 Nature of the Plan
The Plan is a defined benefit pension plan covering almost all certified teachers employed in education in
Ontario and it is registered under the Pension Benefits Act (Ontario) and the Income Tax Act (Canada).
Participation in the Plan is mandatory.
3.2 Pension Entitlement
A member may start receiving a pension any time after reaching age 50, or earlier if the member has become
disabled.
3.3 Pension Formula and Indexation
The annual pension payable to a member is equal to 2% of the member’s highest 5-year average salary
multiplied by the number of years of credited service. At age 65, or earlier if a pensioner is in receipt of a
Canada Pension Plan disability pension, the pension is reduced by 0.45% of the member’s highest 5-year
average salary (or of the 5-year average Year’s Maximum Pensionable Earnings, if lower) multiplied by the
number of years of credited service during which the member contributed to the Canada Pension Plan. The
pension is reduced if the member retires before their age and qualifying service total 85 or before age 65 if
earlier.
Annual pensions are also reduced to provide a survivor pension of 55% or
greater. The reduction varies depending on the percentage chosen and the ages of the member and spouse.
No reduction is made to the pension for a 50% survivor pension. Members without a spouse are provided a
10-year guarantee of benefits without reduction.
Pension benefits are adjusted each year for inflation, subject to an upper limit of 8% and a lower limit of 0% in
any one year with any excess above or below those limits carried forward. In accordance with the terms of the
Plan, the annual adjustment is made each January and is determined as the ratio of the 12-month average of
the Consumer Price Index (“CPI”) ending the most recent September over the 12-month average of CPI
ending the prior September (the “CPI ratio”).
For pension credit earned up to December 31, 2009, inflation protection is 100% of the CPI ratio. Pension credit
earned after December 31, 2009, is subject to conditional inflation protection. For pension credit earned
between January 1, 2010, and December 31, 2013, the minimum inflation protection level is set at 50% of the
CPI ratio. There is no minimum level of inflation protection for pension credit earned after 2013. Inflation
protection levels stated in the most recent funding valuation filing remain in effect until a subsequent filing
updates the amount. Inflation protection of up to 100% for pension credit earned after 2009 can be restored
on a go-forward basis, depending on the Plan’s funded status.
Ontario Teachers' Pension Plan 4
3.4 Funding
The actuarial valuation for funding purposes of the Plan, which must be filed with the regulatory authorities
at a minimum of every three years,
a) determines the sufficiency of scheduled contributions to fund the Plan;
b) determines the actuarial gain or loss arising since the last valuation;
c) determines the surplus or deficit;
d) specifies the rate and duration of any additional contributions required to eliminate a deficit, if any;
and
e) determines the sufficiency of funds available to provide various levels of inflation protection that will
apply for pension credit earned after December 31, 2009. The Partners rely upon this information
when setting inflation protection levels.
Current contribution rates are as follows:
Active members who are required to contribute to the Canada Pension Plan contribute 10.4% of earnings up
to the Year’s Maximum Pensionable Earnings (“YMPE”) plus 12.0% of earnings over the YMPE. Active members
who are not required to contribute to the Canada Pension Plan contribute at the higher rate on all earnings.
Member contributions to the registered pension plan (“RPP”) are capped at a dollar figure with contributions
in excess of the cap being diverted to the Retirement Compensation Arrangement (“RCA”). This cap is subject
to annual revision by the Plan’s actuary by analyzing the amounts necessary to fund RCA benefits.
The Province and designated employers match member contributions. In
addition, when CIP is invoked, the Province and designated employers make additional contributions equal
to the difference between the inflation adjustments that were paid and the inflation adjustments that would
have been paid had CIP not been invoked (“foregone inflation”) for the first 50% of foregone inflation.
3.5 Plan Changes
The Partners’ Agreement specifies that actuarial gains in the Plan are available to enhance plan benefits,
reduce contribution rates, raise pensions prospectively to the level that would have been paid had CIP not
been invoked, or held as a contingency reserve, all as determined by OTF and the Province.
3.6 Solvency
The values of the Plan’s assets and liabilities on a solvency basis are related to values calculated as though the
Plan were wound up and settled on the valuation date and excludes the value of future cost-of-living
adjustments. The Plan performs a solvency valuation each year; however, the Plan is not required to fund any
solvency deficiencies that may arise.
Ontario Teachers' Pension Plan 5
3.7 Plan Maturity
An important indicator of the maturity of the Plan and the ability of contributions to absorb a funding
shortfall is the ratio of the value of future contributions to total assets. As this ratio decreases, it indicates that
increasing contribution rates would have a limited ability to make up a funding deficiency. The ability to use
contribution rates to keep the plan fully funded has decreased over the past 20 years. The Board has
developed tools to analyze policy alternatives and thereby help OTF and the Province to reach decisions
regarding contribution and benefit levels. These decisions influence the Board’s investment and risk
management policies.
3.8 Long-Term Rate of Return Goal
The Plan is required to deliver benefits to the members during their retirement years. To meet these
obligations, and based on the current contribution rates of members, the Province and designated
employers, the Plan needs to earn a rate of return that supports the long-term sustainability of the Plan.
Section 4 – Investment Parameters
4.1 Investments and Investment Strategies
The Board participates in the following:
Equity
Equities generally reduce funding risk in the long term because of higher expected returns than other asset
categories but increase funding risk in the short-term because of higher volatility than other asset categories.
Fixed Income
Fixed Income investments generally reduce funding risk over the long term because of their interest rate
hedging properties but increase funding risk because
of lower expected returns.
Inflation Sensitive
Inflation sensitive investments generally reduce funding risk in the long term because of their hedging
properties against unexpected inflation; however, they generally increase funding risk in the short term
because of higher volatility than other asset categories.
Real Assets
Included in this category are assets that are expected to have similar economic characteristics to the Plan’s
liabilities. These assets generally reduce funding risk over the long-term.
Ontario Teachers' Pension Plan 6
Credit
Credit generally reduces funding risk in the long term by providing diversification benefits as well as a hybrid
of interest rate hedging and growth properties. These assets generally increase funding risk in the short term
because of higher volatility than some other asset categories.
Absolute Return Strategies
Absolute Return Strategies generally reduce funding risk in the long term by providing an expanded
investment opportunity set and diversification benefits, but increase funding risk in the short-term because
of the potential for high volatility of returns.
4.2 Diversification
The Board follows an approach of asset diversification. The purpose of such diversification is to have different
segments of the Fund exposed to different investment risks to achieve an averaging of risks and returns in a
fashion that reduces the likelihood of an overall decline in Fund value and increases the opportunity for gains
over the entire portfolio.
Diversification of the Fund’s portfolio is maintained in order to:
1) reduce the Fund’s annual total return variability;
2) reduce market and credit exposure to any single issuer and to any single component of the capital
markets;
3) reduce exposure to unexpected inflation;
4) enhance the long-term risk-adjusted return potential of the Fund; and
5) reduce funding risk.
4.3 Liquidity
The Fund is managed with a view of providing sufficient liquidity to enable the Plan to meet all of its future
obligations as they become payable. Investments are selected with consideration given to their effect on
liquidity risk within the context of the investment portfolio as well as the income to be derived.
4.4 Asset Mix
In determining the asset mix of the Fund the Board considers the following factors:
1) the Board’s desire to maintain stable contribution rates and benefit levels for the members and the
Province;
2) demographics of Plan membership and the expected pattern for employment of teachers in Ontario;
3) the correlations between the Plan’s assets and liabilities;
4) the Board’s goal of achieving, at a minimum, a rate of return that supports the long-term
sustainability of the Plan;
Ontario Teachers' Pension Plan 7
5) the characteristics of its categories of investments; and
6) adequate liquidity needed to fund current cash flow needs.
The asset mix is shown in the table below.
Asset Mix *
Exposure Minimum Mid Point Maximum
Equities 30% 37% 45%
Fixed Income 0% 34% 67%
Inflation Sensitive 15% 20% 25%
Real Assets 25% 31% 37%
Credit 10% 15% 20%
Absolute Return Strategies 4% 9% 14%
Funding for Investments** -108% -46% 10%
100%
* Overlay strategies are employed from time to time to support risk management.
** The Funding for Investments asset class is comprised of liquidity reserves and funding for investments in other asset
classes.
*** For any period of time in which there is an inconsistency between this asset mix table and the Board Investment Policy
(referred to in subsection 5.6 – Risk Appetite and Investment Policy), the Board Investment Policy shall prevail.
Section 5 – Risk Management Tools
5.1 Asset/Liability Studies
The Plan’s primary long-term risk is an inability to meet expected benefits payable to retired members with
current contribution rates and indexation levels. To manage this long-term risk, the Board shall conduct
asset/liability studies. These studies lead to the recommendation and adoption of an asset mix that aims to
fund the liabilities and reduce the risk of adverse consequences to the Plan from decreases in the Plan’s
funding position.
5.2 Asset Mix
The long-term performance of the Fund is primarily determined by the long-term asset mix. The approach of
broad diversification across various asset classes within the asset mix is an important risk management and
control tool.
Ontario Teachers' Pension Plan 8
5.3 Benchmarks
In order to evaluate the performance of the Fund, the Board shall measure the performance of the
investment program relative to the long-term rate of return goal. Benchmarks are used to assess the active
management performance of the portfolio managers of the Board. In measuring active management,
benchmarks normally represent the return of market indices from each of the asset classes or CPI +
benchmarks.
5.4 Risk Metrics
The Board uses risk measures with a long historical window to calculate potential losses based upon volatility
of returns implicit in the asset mix and the Fund’s holdings. The long-term risk measures support the Board’s
ability to control risk within the Fund, including market, issuer credit, and liquidity risks.
The Board also uses a risk measure with a short-term window to calculate potential losses resulting from a
failure of its counterparties in derivatives, repurchase and prime brokerage agreements to meet their
obligations to the Plan, or resulting from a decline in the value of the collateral exchanged with those
counterparties. The short-term risk measure supports the Board’s ability to control counterparty credit risk.
5.5 Derivatives and Repurchase Agreements
The Board uses swaps, forwards, futures and options, which shall include without limitation equity,
commodity, interest rate, inflation, currency, credit and other derivatives (“derivatives”) and repurchase
agreements to aid in the management of the Fund’s asset-mix and other investment objectives of the Board.
As such, derivatives and repurchase agreements may be used to synthetically replace any Board approved
activity that would traditionally be accomplished with any asset class.
5.6 Risk Appetite and Investment Policy
To apply risk management to investments in a consistent manner, the Board establishes:
• Enterprise Risk Appetite Statement – The Board articulates its risk tolerance to Management in its
Enterprise Risk Appetite Statement. This forms the basis from which Management formalizes risk
tolerances for identified risks. The Board reviews and approves this Enterprise Risk Appetite
Statement at least annually.
• Investment Policy – The Board Investment Policy is applicable to the Fund and aggregate asset
classes. It addresses the risks that are relevant and material at the Total Fund level. The Board reviews
this policy at least annually. The execution of this mandate is the responsibility of the Chief
Investment Officer, Asset Allocation and Chief Investment Officer, Public and Private Investments and
is overseen by the President and Chief Executive Officer.
• Portfolio Governance & Oversight Policy – The Portfolio Governance & Oversight Policy is applicable to
the Fund as a whole and to each asset class. It provides the Board’s framework for governing
performance targets, performance measurement and investment-related compensation. The Board
reviews and approves this policy at least biennially.
Ontario Teachers' Pension Plan 9
Section 6 – Related Party Transactions
The aggregate value of transactions with a related party (as defined in the Federal Investment Regulations)
shall not exceed 3% of the fair value of the Fund’s net investments.
Section 7 – Lending of Cash and
Securities
7.1 Permitted Circumstances
The Board may lend the cash and securities of the Fund as a means of generating incremental income or
cash for investment or otherwise supporting an investment strategy.
Such loans shall be in writing. When the Board lends securities of the fund, the document shall provide for
the Board’s right to terminate the loan and to recall the loaned securities.
7.2 Use of Agents
Management may delegate to a lending agent the authority to select borrowers, negotiate terms and rates
and invest cash or securities collateral under written procedures which specify securities available for loan,
pre-approved borrowers, loan terms, and instruments for the investment of collateral as well as
administrative, risk management and reporting arrangements.
7.3 Collateral and Margin Requirements
When the Board lends securities of the Fund as a means of generating incremental income or cash for
investment, the following rules shall apply. The Board or its lending agent shall receive from the borrower
collateral equal to no less than 100% of the fair value of the securities loaned at the time of the transaction.
The amount of collateral margin taken shall reflect best practices in local markets. Both loaned and collateral
securities must be marked to market daily to account for increases in the fair value of the securities loaned or
decreases in the fair value of the collateral. Shortfalls in the amount of collateral must be rectified by the
following business day unless otherwise agreed to in writing. The collateral obtained to secure a loan of
securities or any securities purchased with such collateral must be either cash or high quality, readily
marketable securities acceptable as a direct investment under the Board’s investment policies. Title to all
collateral must be clear.
Ontario Teachers' Pension Plan 10
Section 8 – Short Selling of Securities
8.1 Permitted Circumstances
The Board may short sell securities, by way of borrowing securities or otherwise, to enhance the return or
reduce the risk of the Fund.
Such short sales shall provide for the Board’s right to terminate the transaction and to recover the Board’s
collateral.
When engaging in short sale transactions Management shall give consideration to the related risks.
8.2 Collateral and Margin Requirements
When the Board enters a short sale transaction the credit quality of the prime broker or lender, and (where
relevant) the parent company of the prime broker or lender, shall be identified and monitored throughout
the transaction. The Board will provide the amount and type of collateral consistent with market
requirements.
Collateral shall be required to be held by the prime broker or lender in a manner designed to safeguard it, to
the extent possible, from the interests of other creditors of the prime broker or lender. The agreement must
provide for the collateral or equivalent collateral to be returned to the Board promptly upon the termination
of the short sale transaction and after the Board has satisfied its obligation. The short sale securities (loaned
securities) and the collateral shall be marked to market daily so that exposures of the Board may be
monitored.
Section 9 – Pledging and Borrowing
Assets
9.1 Permitted Pledging
The Board may pledge, charge or otherwise grant a security interest in assets or post margin as required to
effect transactions in derivatives and repurchase agreements, to secure a permitted borrowing or guarantee,
or to effect a short sale.
9.2 Permitted Borrowing
The Board may borrow provided such borrowing is permitted in accordance with applicable law.
The Board may also guarantee the obligations of, or the performance of obligations by, entities in which the
Board has a direct or indirect equity interest. The liability of the Board under any such guarantee shall not
exceed a percentage of the obligations guaranteed which is equal to the Board’s direct or indirect
percentage equity interest in the guaranteed entity, unless a higher percentage is approved by the Chief
Investment Officer, Public and Private Investments or a delegate.
When engaging in permitted pledging, guarantees, or borrowing Management shall give consideration to
the related risks.
Ontario Teachers' Pension Plan 11
Section 10 – Voting Rights
10.1 Value of Voting Rights
The Board shall exercise voting rights in the manner that most enhances the long-term value of the Plan’s
investments.
10.2 Proxy-Voting Guidelines
The Board shall establish proxy-voting guidelines and review them at least annually.
10.3 Reports of Voting
The President and Chief Executive Officer or his delegate shall report to the Board annually on the voting of
proxies.
Section 11 - Valuation of Investment
Assets and Liabilities
The Fund’s investment assets and liabilities shall be valued by using fair values or as otherwise may be
required by law.
11.1 Frequency of Valuation
The frequency of valuation shall be dependent upon the nature of the investment asset or liability. To the
extent possible, fair values shall be obtained or valuations prepared on a daily basis. However, for certain
investments, for example, private instruments and real estate, valuations shall be prepared or reviewed on at
least a semi-annual basis.
11.2 Fair Value
Where ascertainable, the fair values of the Board’s investment assets and liabilities shall be based on quoted
prices (unadjusted) in active markets, or other relevant observable inputs.
11.3 Where Observable Inputs are Not Available
Where observable inputs are not available for an investment asset or liability, a suitable method of valuation
shall be used including the use of: discounted cash flows, earnings multiples, appraisals, prevailing market
rates for instruments with similar characteristics or other pricing models as appropriate. External appraisers
may be used to provide independent valuations or verify the reasonableness of internal valuations.
Ontario Teachers' Pension Plan 12
Section 12 – The Effect of Expenses on
Performance
The Board shall give consideration to the impact of administrative expenses, external management fees and
performance fees when establishing the asset mix. The Board receives reports on the performance of the
Fund both before and after expenses throughout the year. Management shall be responsible for ensuring
expected returns on invested assets are monitored against budgeted expenditures.
Section 13 – Compensation of
Managers
Employees may be eligible for incentives based on portfolio and Fund performance and the achievement of
corporate objectives. External managers are eligible for incentives based on portfolio performance.
Section 14 – Delivery to Actuary
A copy of this SIPP and any amendment shall be delivered to the Board’s actuary within 60 days after this
SIPP is amended.
Section 15 – Statement Review
The Board shall review the SIPP at least annually
4
.
4
See subsection 7.2(1) to the Pension Benefits Standards Regulations, 1985.
Ontario Teachers' Pension Plan 13
