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Winner Announced for Toronto CFA Society and Hillsdale’s Canadian Investment Research Award

Date: Friday, March 2, 2012
Author: Press Release

Toronto CFA Society and Hillsdale’s $10,000 Award for Canadian Investment Research Goes to Rotman for Pension Research

Toronto, 1 March 2012: Toronto CFA Society and Hillsdale Investment Management announce that Alexander Dyck and Lukasz Pomorski, professors at The Rotman International Centre for Pension Management have won the 2011 Canadian Investment Research Award.

Toronto CFA Society and Hillsdale Canadian Investment Research Award is open to global researchers conducting research related to Canadian capital markets, including both academics (professors and students) and practitioners. Submissions on topics, such as portfolio and risk management, asset valuation and performance measurement, are judged on the potential contribution of their applied research to Canadian capital markets. Toronto CFA Society and Hillsdale Investment Management offer this prestigious award annually to encourage high-quality research on investment management.

The winning research paper, “Is Bigger Better? Size and Performance in Pension Plan Management,” was selected by a panel of judges from among 12 submissions. Toronto CFA Society and Hillsdale Investment Management will award a $10,000 CAD prize to the winners today at the Toronto CFA Society 2nd Annual Award Reception.

Download the Award Winning Research Paper in PDF

“This paper by Professor Dyck and Professor Pomorski makes very valuable contributions to pension plan management discussions," said Chris Guthrie, CFA, President & CEO, Senior Portfolio Manager and Founding Partner, Hillsdale Investment Management. “The authors do an exceptional job of exploring how larger defined benefit pension plans succeed at overcoming the diseconomies of scale typically seen at the fund level to achieve superior returns. Both Hillsdale and Toronto CFA Society are proud to recognize their excellent research.”

Rotman researchers used CEM Benchmarking data covering more than 800 global defined benefit pension plans to assess the impact of size on a pension plan’s performance. “Larger DB plans earn better returns across the board, but the advantage of size appears to be more pronounced in plans with strong governance practices,” said Professor Pomorski. “Most of the outperformance is driven by cost savings arising from in-house investment capabilities and superior returns achieved by investing in alternatives to stocks and bonds,” he said. The researchers concluded that “bigger is better when it comes to pension plans.”

Key findings:
• Larger DB plans outperform smaller plans by about 0.5% (43-50 basis points) per year.
• This difference in performance means that a participant’s retirement savings in a larger DB plan (the top 20% by size) could be 13% greater at retirement than savings in a smaller plan (the bottom 20% by size).
• Up to half of the performance gains arise from lower investment costs due to internal management, which costs at least three times less than external management fees.
• The majority of the superior returns comes from expansion into alternative asset classes, such as private equity, real estate and infrastructure, where size and direct investment capabilities are an advantage. Large plans have both lower costs and higher gross returns for alternative investments, yielding up to a 6% improvement in returns per year.
• There is suggestive evidence that strong governance practices contribute to higher returns and a greater ability to take advantage of scale economies.

About the winners
Alexander Dyck is a Professor of Pension Management at The Rotman International Centre for Pension Management and teaches finance and business economics at the University of Toronto’s Rotman School of Management. Previously, he was an assistant professor at Harvard Business School and holds a PhD from Stanford University. Lukasz Pomorski is an Assistant Professor of Finance at the University of Toronto's Rotman School of Management. He received a PhD in Finance and an MBA from the University of Chicago, and his award-winning research has been covered in The Financial Times, The Wall Street Journal and The Washington Post.

About Hillsdale Investment Management
Founded in 1996, Hillsdale is an independent Canadian investment boutique, providing a full range of traditional equity and alternative investment strategies to both institutional and individual investors. Hillsdale manages a spectrum of long only, long/short and custom designed strategies employing a core investment style carefully implemented using an adaptive multi-strategy, risk controlled process.

About Toronto CFA Society
Toronto CFA Society is a not-for-profit organization supporting the professional and business development of CFA charterholders. The society provides members with a local perspective on a global designation including: educational programs, sponsored events, job postings, quarterly newsletters, a comprehensive affinity program and networking opportunities.

The society celebrated its 75th anniversary in 2011 and is affiliated with CFA Institute, the global body that administers the Chartered Financial Analyst curriculum and sets voluntary, ethics-based performance-reporting standards for the investment industry. With over 7,500 members, Toronto CFA Society is the second largest of the 135 CFA societies operating in the world. Our members are leaders in ethics within the financial community. For more information, please refer to www.torontocfa.ca.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Note to editors: The authors will give a brief overview of their findings at this afternoon’s Awards Reception, at approximately 4:20 p.m. Today’s event is open to the media who can register on-site using a business card. Interviews are available upon request by emailing media@torontocfa.ca. The Awards Reception will be held from 4-6 p.m. at the BMO Client Centre, 68th floor, First Canadian Place, Toronto.

For Further Information:
Hillsdale Investment Management Inc.
Harry Marmer, Executive Vice President, Institutional Investment Services
Phone: 416-913-3907

Media contact:
Toronto CFA Society
Carol Dunsmore, Media Contact
Phone: 416-938-1881