For many years, invitations have gone out in the fall via email to clergy, wardens and treasurers of the parishes and ministry organizations of the diocese of New Westminster, inviting that group to attend the annual Consolidated Trust Fund (CTF) information session. Not to be confused with an official Annual Report, the information session accompanied by a detailed booklet and PowerPoint presentation is an opportunity to find out how the diocesan and parish investments have fared in the previous year. Philips, Hagar and North (PH&N) is the investment firm that handles the CTF and that firm has been guiding the diocesan and parish investments since 1991. PH&N is currently the Canadian institutional asset management division of the Royal Bank of Canada (RBC)
For much of the past decade, St. Stephen’s, West Vancouver hosted the event on the first Saturday of December. In 2019, the venue changed to St. Christopher’s, West Vancouver and did indeed take place on December 7 of that year. For almost six years the two Institutional Portfolio Managers presenting the report to the diocese have been and continue to be Paul Martin and Graeme Baker. Diocesan Treasurer, Bob Hardy, ODNW and Chief Financial Officer of the diocese of New Westminster, Shailene Caparas are also present and organize the event. In so many ways 2020 was a very different year. Gathering in a church meeting room was not possible due to COVID-19 safety protocols, so the informal report was scheduled for the evening of Thursday, January 28, 2021 via Zoom.
Paul Martin was unavailable for the reporting session but PH&N were well represented by Graeme Baker. Holding the session nearly two months later than usual worked well as it allowed for a more detailed presentation and more compete assessment of the entire year of 2020.
The Zoom meeting was well-attended with at least three times as many participants as the average for the in-person Saturday morning meetings of years previous. Not having to drive to the meeting was certainly a plus factor, however it is more than likely that parish treasurers, wardens and some priests in charge had an increased interest in their investments given the uncertainty due to COVID. There were approximately 60 in attendance, with the addition of five Synod staff members, Treasurer Bob Hardy and the presenter Graeme Baker. Over the last decade the onsite attendance for this report was approximately 15. Folks from the Sunshine Coast and the eastern Fraser Valley were particularly pleased with the online arrangements as many of them had never attended the CTF report session due to distance.
And the good news is that, overall, investments did well. For long term investors like the diocese, holding the course through the dip in the market at the outset of the pandemic in March and April paid off with excellent numbers later in the year.
The bounce back in investments is in part due to some effective interventions from governments. The Federal Government of Canada stepped up, but according to Graeme Baker, “the worrying news is that we have some large debt to GDP levels that will be hanging around.” Some components of the diocesan portfolio have improved to pre-pandemic levels, particularly in the retail sector. The economy recovered steadily and the prediction at the time of this meeting in late January 2021, was that more relief from government in the wake of the second wave would have a positive effect.
Bond markets came down sharply toward the middle and end of 2020 and into 2021. The fixed income part of the portfolio according to Baker is “quite muted” however, bonds remained steadfast through the volatility of early in the pandemic which aided in the recovery and ultimate strong increase in the portfolio’s earnings. The D of NW portfolio continues with the strategy of balanced equities and bonds. PH&N continues to favour equities. During the volatility, PH&N sold bonds and focused on equity buying, particularly the global equity markets which performed at 30%. This part of the portfolio is largely responsible for the overall success of the diocesan and parish investments currently valued at 88 million (diocese, 52 million; parishes, 36 million) a 14% increase over 2019 (which was also a very good year). However, the plan is to continue to own Bonds moving forward as they are a good way to protect against future equity fund volatility. Looking forward, Baker said that this past year of performance by the Bond market was a good one because of the drop in interests rates, but cautioned that the Bond market coming up will likely not do much more than 1%. Going forward they are looking at moving into more investment in other instruments.
When it comes to Global Equity Funds, overall PH&N is selecting stocks from the global fund outside of the US, although that country represents 60% of the investment potential. Graeme Baker cited some risk factors, stating that although equity markets have started strong, there had been up to that point (January 28, 2021) problems vaccinating the population and the resistance of the new variants which would continue to effect the recovery of the US economy. The markets will improve with everybody getting vaccinated, and the faster that happens the better.
A newer piece in the portfolio is the real estate fund that invests in corporate real estate properties across Canada. In partnership is British Columbia Investment Management Corporation (BCI), a provincial asset manager. RBC has also partnered with Quadrille Capital and started their own real estate investment fund. Graeme is optimistic and enthusiastic that this fund will be successful.
Graeme was very open to answering questions throughout the presentation and the Q&A benefited from the Zoom meeting format, with participants typing in their questions uses the “chat” feature.
A question came in about the risk of commercial real estate with people working from home. Graeme responded that the commercial real estate market will continue to change drastically in how it looks, enclosed malls with fashion retail, lower end office facilities are in for a rough ride, but real estate is always a good long range strategy.
Throughout the 90 minute presentation and Q&A a great deal of information was covered about specific stocks that have performed well i.e., Shopify, the Canadian online retail referral company, Ørsted the Danish green energy company and Neste the largest global producers of renewable diesel fuel.
A question was asked about whether or not the D of NW portfolio held any Tesla stock. Graeme responded that the CTF does not contain Tesla as its evaluation is larger than its global presence. Tesla needs to capture more of the global market in order to justify its evaluation. Of course we, in one of the wealthiest places in the world see quite a few Teslas on the road and there are a number of government rebates and other financial advantages to owning electric vehicles beyond just the benefit to the environment. However, we are a very small portion of the planet which needs to be taken into account when investing on a global scale.
Every year of the 10 years that I have attended the meeting, the question of socially and environmentally responsible investing has come up. At this meeting as in years previous, Graeme informed the participants about the PH&N policies in this regard which are among the best on the planet. Socially responsible investing has always been a priority of the diocese and of PH&N and that continues in earnest. In 2019 RBC Global Asset Management embarked on a program Stewardship in Action and the overview booklet was distributed at the 2019 information session and has remained available. A downloadable copy is available online here. https://us.rbcgam.com/resources/docs/pdf/HTML-files/web/100819-stewardship-in-action.pdf.
With this diocesan priority on the agenda, in 2020, diocesan leadership assembled an investment committee in order to better track diocesan investments, offer a missional perspective and pursue new markets and new possibilities i.e., more investment in mortgages, property development and emerging technologies.
The comments in the “chat” section of the Zoom meeting on January 27 were very positive and those who attended learned a great deal not only about the diocesan and parish investments but they were also given an insider’s look at what is happening with investment on a global scale.
Treasurer Bob Hardy, closed the meeting thanking Graeme and summarized the meeting saying, “our investments continue to do very well.”
Many thanks to Administrative Assistant to the Finance Department on Synod staff, Elias Neto for his excellent work, hosting the Zoom meeting.
The accompanying printed piece is an important part of these information sessions and is available for downloading below on this posting.
For more information about diocesan finances and the CTF in particular please contact Shailene Caparas by email.