Statement of Investment Philosophy and Beliefs Policy 34-205 | Effective Date: June 5, 2025

Policy

The cornerstone of WorkSafeNB’s investment philosophy, by staff, the Outsourced Chief Investment Officer (OCIO) and the governing fiduciaries, is due diligence. 

The Board of Directors has developed investment principles outlining their philosophy and beliefs.

Principles

I. Governance: The Board of Directors believes in establishing clear and unambiguous governance principles, which enunciate the roles and responsibilities of all parties involved in the investment of funds, including the Board of Directors, the Finance and Investment Committee, WorkSafeNB staff, the OCIO, and external investment managers.

An effective governance structure is the foundation of a successful investment management program. Governance structures ensure that all parties fulfill their due diligence requirements, understand their roles and responsibilities and create accountability for the various decisions involved in developing and implementing the investment management function. Proper governance improves risk management; investment performance and ensures efficient decision-making processes for the Board of Directors, the Finance and Investment Committee (the Committee), staff and the OCIO.

Accordingly, WorkSafeNB has adopted the following decision-making structures for the OCIO-managed assets and of the non-OCIO-managed assets:

Investment Decision-Making Structure - OCIO Assets

Investment Decision-Making Structure - Non-OCIO Assets 

While the above table provides a general framework for the governance of the investment function, the details that clarify the roles and responsibilities of all parties involved is provided in the attached appendices: Appendix A – Decision Map and Appendix B – Detailed Roles and Responsibilities.

II. Fundamental Risk: The fundamental investment risk faced by WorkSafeNB is that it will have insufficient assets to pay its liabilities, which relate to the provision of future compensation payments to injured workers and their dependants.

The portfolio’s investment program must be customized to reflect its purpose, time horizon, risk tolerance, legal constraints and liquidity requirements. The primary long-term risk is that the assets of the fund, together with the future income thereon, will be insufficient to meet the benefits liabilities payable to the beneficiaries. Asset/liability studies are necessary to ensure that the portfolio remains suitable in light of the liabilities (measured on a going-concern basis).

III. Asset Allocation Decision: The asset allocation decision is a key element in determining the future return and risk of the investment portfolio. Policy 34-200 Investment Goals and Objectives reflects the Board of Directors’ views on the asset allocation decision, expected returns, and acceptable risk tolerance.

The asset allocation decision is one of the most important factors in determining the variability of returns. In setting its policy asset mix, the Board of Directors will rely on periodic asset/liability studies, performed by reputable external consulting firms, to ensure that its assets are structured properly in light of the related liabilities (measured on a going-concern basis).

The policy asset mix is documented in Policy 34-200 Investment Goals and Objectives, along with the board’s return objectives and policy towards risk. Further information on expected returns and various expected risk measures (volatility of assessment rates, volatility of funded position, volatility of returns) can be found in the most recent report on the asset liability study that was conducted in 2024.

IV. Diversification: The primary tool available to control volatility of returns is diversification. This is accomplished by investing in various asset classes, geographies, industries, individual securities and investment styles.

The Board of Directors is committed to earning the highest possible rate of return at an The Board of Directors is committed to earning the highest possible rate of return at an acceptable level of risk (as determined in the asset liability study).

Standard deviation, a measure of volatility of returns, is a common proxy used to evaluate risk in the investment industry. The Board of Directors intends to control the variability of returns while ensuring that the fund’s investment objectives are met and the portfolio is constructed responsibly relative to the characteristics of the liabilities.

The volatility of returns can be managed through prudent and thoughtful diversification. Diversification is achieved by investing in different asset classes and strategies and by diversifying by investment style, geographically, sector and individual security. In addition, bond portfolios are diversified into various issuers and by term to maturity.

V. Disciplined Approach to Investing: A disciplined approach to investing, including rebalancing of policy asset allocations to target, is required to achieve good long-term investment results and to maintain risk at an acceptable level.

WorkSafeNB has built its investment management program around a number of policies, directives, and procedures, based on this Statement of Investment Philosophy and Beliefs. These documents are the result of a considerable amount of research, analysis, and discussion by WorkSafeNB staff and members of the Board of Directors and the Committee. The Board of Directors believes that the result is a well-structured and appropriate process.

A disciplined approach to investing requires proper due diligence on the part of all involved with the investment fund. A long-term focus is required in the decision-making process reflecting the long-term nature of WorkSafeNB’s liabilities and mandate. The policy asset mix is selected with due consideration of the characteristics of the liabilities via the asset liability study.

A structured rebalancing mechanism is employed as outlined in Policy  34-200 Investment Goals and Objectives in order to apply a disciplined approach to maintaining the asset mix within an acceptable range relative to policy.

Adopting this disciplined approach means the Board will follow a strategy that was modeled (via the asset liability study) to best achieve the Board’s objectives over the long term. The Board will not abandon this long-term strategy to chase short-term performance. The Board of Directors recognizes that the capital markets will cause various asset classes, investment styles, and investment managers to outperform and underperform at various points in the economic cycle. The Board also recognizes that over short and medium time periods the investment portfolio’s real return can and will deviate significantly from long-term expectations, and that short-term underperformance alone is not a reason to change a policy that is based on a sound long-term strategy.

VI. Investment Managers: WorkSafeNB’s goal is to employ the best investment managers to implement each of the allocations set out in its policy asset mix. The board has decided to use external professional investment managers exclusively in the management of the fund’s assets. The board has selected an OCIO provider to construct a portfolio of external managers to implement the publicly traded portion of the investment portfolio and has given WorkSafeNB staff the authority to construct a portfolio of external managers to implement the alternatives portion of the investment portfolio.

To achieve the highest possible rate of return at an acceptable level of risk, the Board of Directors’ goal is to employ the world’s best investment managers for the various mandates in its investment management structure.

General guidelines regarding the use of external managers are contained in Policy 34-200 Investment Goals and Objectives, Directive 34-205.04 Investment Portfolio Management Structure, Directive 34-205.02 Process and Criteria for Hiring an Alternative Investment Manager, Directive 34-205.03 Terminating an Alternative Investment Manager, and the OCIO Agreement.

Each investment manager will be hired in accordance with the relevant governing documents listed above, and each manager’s performance and continued suitability for the mandate will be monitored actively by WorkSafeNB staff or the OCIO.

VII. Performance Measurement:  Performance results will be measured, monitored, and compared to investment objectives. Reporting of performance measurement results will be clear and concise.

The fund’s performance will be measured at both the total portfolio and asset class level. Investment performance results will be evaluated against, and compared with, measurable investment objectives as established in Policy 34-200 Investment Goals and Objectives. Returns will be reported to the Committee on a quarterly basis. Investment returns will be calculated in accordance with the guidelines established by the Global Investment Performance Standards (GIPS). Performance measurement will be provided by an external performance measurement firm.

Returns will also be measured at the individual manager level for the alternatives and currency overlay manager, and at the fund level for the OCIO managed components, as part of the manager monitoring process delegated to staff and the OCIO. Returns will be analyzed and monitored over a number of periods, and attribution analysis will be used where feasible to improve the understanding of the sources of the asset classes’ added return and risk levels.

WorkSafeNB may also contract with external investment experts to periodically review the performance of the Accident Fund or any subset of the Fund (OCIO or internally managed).

VIII. Education: Ongoing access to education for the Board of Directors, the members of the Finance and Investment Committee, and staff is crucial in ensuring that the investment policies and strategies remain consistent with WorkSafeNB’s investment objectives

Members of the Board of Directors and Committee are expected to maintain their knowledge of investment matters so as to be able to fulfill their fiduciary duties with respect to the investment portfolio management process.

The investment staff are required to obtain and maintain a high degree of expertise with respect to investment related matters. In addition, staff and the OCIO will assist the Board of Directors and Committee members to obtain the required education through ongoing processes. The education requirements for board members and staff are described in more detail in Directive 34-205.08 Education.

IX. Administration and Management Costs: Administration and management costs can have a significant impact on long-term results and will be monitored, controlled, and reported.

In formulating Policy 34-200 Investment Goals and Objectives, and in particular the policy asset mix, the Board of Directors gives consideration to the impact of administrative expenses, external management fees, and other costs on net returns.

In exercising control over administrative costs and management fees, it is recognized that fees and expenses must be compared with the quality of the services provided. The goal is to obtain the best advice and services on a value-for-money basis.

Performance is generally reported on a before-fee basis for managers with segregated accounts and on an after-fee basis for pooled fund and partnerships, in compliance with standards developed by the CFA Institute. However, total expenses will also be reported to the Committee annually, as well as net-of-fee performance quarterly.

X. Code of Ethics: All employees of WorkSafeNB involved in the investment process must abide by all applicable laws and regulations, conduct themselves in an ethical manner, and always place WorkSafeNB’s interests ahead of their own.

Members of the Board of Directors are required by legislation to remain free of interests or relationships which might prove harmful or detrimental to WorkSafeNB’s best interests, and to disclose any conflict or appearance of conflict that may arise.

All employees are bound by WorkSafeNB’s Code of Ethics and the Board adheres to its Code of Conduct.

In addition, individual employees and external consultants involved in the investment process are expected to comply with all governing laws and regulations, and the CFA Institute’s Code of Ethics and Standards of Professional Conduct. These criteria apply to the President and Chief Executive Officer, the Vice-President, Strategy & Finance, the Chief Investment Officer - Alternatives, the Alternative Investments Manager, the Director, Public Investments, and the Manager, Investment Compliance and Reporting.

Previous policy

Policy 34-205 Statement of Investment Philosophy and Beliefs, release 5, effective August 10, 2022

Policy 34-205 Statement of Investment Philosophy and Beliefs, release 4, effective December 9, 2021

Policy 34-205 Statement of Investment Philosophy and Beliefs, release 3, effective February 6, 2020