In last year’s Chair’s message, I reflected on all that OPB accomplished in its first 25 years as Plan administrator of the PSPP. 2015 was another significant year for OPB as we moved forward with a number of innovative initiatives that reinforced our reputation as one of the world’s top pension plan administrators.

Leading Innovation

The two initiatives that will have the greatest impact on OPB’s future are Asset Pooling and Advisory Services.

Asset Pooling

Since the spring of 2012, when the Government of Ontario announced its interest in pooling the assets of broader public sector pension plans, we have worked very closely with the Government of Ontario and the Workplace Safety and Insurance Board (WSIB), the latter being our partner in this strategy, to lay the groundwork for success. At this time, we expect that asset pooling – through the Investment Management Corporation of Ontario (IMCO) – will be implemented in 2017. We have remained steadfast in our primary goal with IMCO: to enhance investment returns. By combining the assets of OPB and WSIB, IMCO will have a larger investment pool to ensure it can attract and retain the best investment talent and participate in a broader range of investment opportunities. The Board and I have been very focused on meeting our fiduciary obligation to ensure the move to asset pooling is the right strategy for OPB. We believe that, properly implemented, this strategy will benefit the financial status of the Plan and is in the best interests of Plan beneficiaries and stakeholders. We will continue to be actively involved as IMCO evolves.

Advisory Services

Ensuring secure pensions for our members also means making sure that our members have the information they need to make sound decisions about their pensions. In 2015, we took member service to the next level, formally announcing our Advisory Services program to members. In the first year, our Advisors helped almost 2,500 members navigate key pension decisions within the context of their broader financial circumstances.

Protecting the Pension Promise

As a pension plan, we operate over a long-time horizon – protecting the long-term sustainability of the Plan is our top priority. We do this by ensuring our clients and stakeholders understand the value of the Plan they have and by prudently investing the assets of the PSPP. Our long-term rate of return since OPB’s inception in 1990 is 8.5%, which has helped us achieve a 98% funded status. We have continued to successfully protect the pension promise for our current and future members. Through responsible and prudent management, we have maintained a strong funded status, kept contribution rates for members and employers affordable, and protected benefits. Our contribution rates remain among the lowest of the public sector plans.

To ensure the continued long-term sustainability of the Plan, OPB regularly conducts a series of studies that review the appropriateness of the assumptions we use to value the Plan, including the discount rate and a long-term funding study to ensure that contribution rates and benefits are appropriate. This study is the basis for recommendations to the Plan Sponsor around changes to contribution rates and Plan design. Given the continued market volatility, global economic conditions we are seeing in 2016 and the emergence of negative interest rates in some countries, we think the timing is right for OPB to review the discount rate and other assumptions used to value the PSPP.

Other Highlights

Enterprise Risk Management (ERM): During the year, we further strengthened our risk management processes by revamping our ERM program to give the Board of Directors and management team timely and more accurate data as well as more actionable mitigation strategies.

Supporting Environmental, Social and Governance (ESG): OPB is committed to ESG in a way that supports its overriding fiduciary responsibility to act in the best interests of the Plan. There is strong evidence that improved ESG engagement can have a positive impact on investment portfolio performance. I am pleased to say that in 2015, we signed the United Nations-supported Principles of Responsible Investing and developed our own proxy voting strategy, which incorporates ESG factors into our voting of publicly traded securities.

Leading with Good Governance

Three Board members – David Brown, Peggy Gilmour and Shamira Madhany – completed their terms in 2015 after providing thoughtful advice and exemplary service over many years. I would also like to welcome our newest members to the Board, Kevin Costante and Lisa Hillstrom, who were both appointed in 2015, as well as Michelle Savoy, who was appointed in January 2016. These individuals bring a wealth of knowledge and experience to the Board, which will help us navigate the challenges ahead.

On a personal note, my appointment as Board Chair will end in June of this year. A new Chair will be appointed in a timely fashion and in accordance with OPB’s strong governance structure around Board appointments. It has been my honour to serve the stakeholders for over 12 years and it has been my great pleasure to work with OPB’s dedicated management team, led by Mark Fuller, and all of the talented employees who have helped us accomplish so much. I’d also like to thank my fellow Board members for their careful and considered direction.

OPB’s commitment to excellence and innovation, coupled with its proven ability to respond swiftly and effectively to changes, positions us well to ensure the health of the Plan for this generation and generations to come.

I am very proud of all that OPB has accomplished in its 25 years as the Plan’s administrator. Our careful and responsible management of the Plan, coupled with our innovative strategies to protect our members’ retirement security, have positioned OPB as a leader in the global pension landscape.

During a period in which defined benefit plans have found themselves increasingly under the microscope, OPB’s responsibility, restraint and transparency have established us as a trusted, responsible and respected government agency. Our performance has enabled contribution rates to remain affordable and has protected benefits. We have successfully navigated the ups and downs of the markets to maintain a very strong 98% funded status, and we have done so with one of the lowest expense ratios in the industry.

I’m pleased to report that despite a challenging year in the global financial markets, we ended 2015 with a return of 6.14%, which had a value-add of 0.77% (77 basis points) over our benchmark of 5.37%. At the end of 2015, the PSPP was 98% funded – a very solid position for us to be in.

Long-Term Funding

We are committed to protecting the long-term sustainability and affordability of the Plan. As part of our prudent management of the Plan, we regularly conduct long-term funding studies to determine whether the current contribution rates are set to adequately fund the Plan going forward. While our 2014 study didn’t show a need for any immediate adjustments, we know that people are living longer, which drives pension costs higher, and the investment outlook ahead is more challenging.

Another factor that can impact our contribution rates is the discount rate the Plan uses in its valuations. The discount rate reflects what the Plan’s assets can reasonably be expected to earn over the long term, less expenses and provisions for unanticipated events.

Setting the discount rate is a rigorous process designed to ensure that the assumption is reasonable and at an appropriate level for the Plan. Changes to the discount rate impact the Plan’s projected liabilities and, by extension, the Plan’s funded position.

We regularly review the discount rate to confirm that it is set at an appropriate level, meaning that it is at a level that OPB believes we can achieve in terms of long-term average annual investment return.

We’ve now been in a low-interest-rate environment for quite some time, and there are no signs that this trend is going to reverse in the near future. In fact, we’re starting to see the emergence of negative interest rates in several countries. Given this environment, we believe that our expectations for future returns, as reflected in our discount rate, may need to be moderated. Accordingly, during 2016, we will be conducting a review of our current economic and demographic assumptions. This will include a review of our expected rate of return on assets (the discount rate), the inflation assumption, the rate of salary increase assumption and the life-span assumption. This review could lead to recommendations to change the assumptions we currently use, including lowering the discount rate used to value the PSPP from its current level of 5.95%. Overall, such changes would likely result in a modest decline in the funded status of the Plan. However, we believe that ensuring the assumptions we use are realistic, and that we make required changes in a timely fashion, will be key to properly managing the financial health of the Plan.

In 2016, we will be conducting a long-term funding study to assess the adequacy of our contribution rates. Should the study show a need to adjust contribution rates, we would make a recommendation to the Plan Sponsor to adjust them.

Managing Expenses

We are committed to providing world-class client service while also being cost-efficient. Our total expense-to-average-assets ratio is one of the lowest among our peers. Our track record of operational excellence and effective cost management has positioned OPB as a highly respected government agency.

While we will continue to be prudent in managing our expenses diligently, there are a number of crucial initiatives we have put off in recent years that we must begin to address in 2016. As part of our cost-constraint measures, OPB has restrained spending on information technology (IT) infrastructure and core applications since 2008. While we have been maintaining our systems, we now need to focus on a generational shift in technology to meet the evolving needs of our clients and stakeholders, as well as to ensure our technology remains current and secure.

We are preparing to replace our aging pension administration system in the coming years. The new system will further improve data security and processing efficiency for member services. The next-generation system will also help to support our progressive digital strategy, including planned client and stakeholder outreach initiatives as well as customer self-service via e-services.

In 2016, we will position ourselves to start the multi-year IT modernization project in 2017.

Preparing for Asset Pooling

In 2015, the Government of Ontario passed the Investment Management Corporation of Ontario Act, creating IMCO and further laying the policy foundation for the new investment entity that will invest OPB’s and the Workplace Safety and Insurance Board’s (WSIB) assets. We expect that asset pooling will be implemented in 2017.

As this year’s landmark TD Centre co-ownership acquisition demonstrated, we see significant investment value in partnering with large, world-class organizations that have a similar investment philosophy as us. Asset pooling will give us greater capability to invest in large acquisitions as well as providing us with the enhanced ability to back up investment decisions with even stronger research and risk management capabilities.

Asset pooling will give OPB more opportunity to invest directly in high-quality opportunities, helping us realize higher net investment returns at a lower cost, which we believe will support the long-term sustainability of the Plan. We believe asset pooling will boost investment returns, and even a small increase could have a significant impact. For example, if OPB were able to increase its annual investment returns by 25 basis points (1/4 of 1%) above the Plan’s 5.95% discount rate, this would add approximately $2.0 billion to the funded status of the Plan at the end of 15 years. While IMCO will be responsible for managing our assets, OPB will continue to maintain control over the strategic asset mix of the Plan, staying consistent with its fiduciary duty to its members.

Elevating Our Client Service

With the launch of our Advisory Services program, 2015 marked a significant leap forward in client service excellence. Our qualified Advisors can help members navigate pension decisions within the context of their broader financial circumstances. I truly believe this program fills an important need and will help members avoid potentially costly mistakes that could negatively impact their retirement security. I am thrilled with how well the program has been received by our members.

I am very pleased to say that OPB was recognized as one of the top two out of 13 ranked pension administrators in Canada and one of the top five out of 77 ranked globally by CEM, a leading pension administration benchmarking firm.

Looking Forward

Our successes would not have been possible without a shared commitment to going beyond simply meeting our fiduciary duty to pay accrued benefits. We also ask how we can best protect the pension promise for our members and how we can innovate for our members’ retirement security.

I want to thank the Board, the leadership team and all employees for their dedication, commitment and hard work. As we chart our path for the next 25 years, I am confident that our responsible approach to pension administration and investment management, paired with our commitment to driving innovation, will allow us to continue to protect the long-term sustainability of the Plan.

People often think about investments when they think about a pension plan, but excellent pension administration is equally critical to the Plan’s success. This year, OPB’s Chief Pension Officer, Peter Shena, talks about how we’re managing the pension side and about some of the exciting ways we’re taking our client service to the next level.

People may not be familiar with what a Chief Pension Officer does. Can you talk a bit about your role?

As the Chief Pension Officer, I have three key responsibilities: first, to manage the liabilities of the Plan; second, to ensure our clients receive high-quality and efficient service; and third, to provide members with access to the advice and assistance they need to make sound decisions about their pension. These responsibilities are all equally important and are critical to ensuring the long-term success of the PSPP.

Managing the liabilities of the Plan well is vital to its long-term sustainability – and to keeping contributions affordable and maintaining benefits. It requires staying on top of changes or trends that can impact what it costs to pay the pension promise, such as changes in how long people are living or the average salary in the Plan. We do this by running a long-term funding study and an experience study to test whether the contributions and benefit structure are sustainable, and whether the assumptions we’ve used to value the Plan’s liabilities match the Plan’s actual experience. We perform these studies at least every five years and we expect to conduct our next review in 2016.

When it comes to client service, everything we do is ultimately about providing our members with a secure pension and a superior experience. Last year, we formally announced our Advisory Services program to ensure we can help members navigate complex pension decisions in the context of their overall financial picture – we want to ensure they are equipped to make sound pension decisions.

Can you talk to us about Advisory Services and why OPB launched this important initiative?

Pension issues are complex and the wrong or sub-optimal decision can have a significant impact on an individual’s financial future. Our members are regularly faced with overwhelming financial choices, without the pension and general financial knowledge to make those decisions. To make the best decision for their future, members need to consider pension decisions in the context of their broader financial circumstances and goals. We introduced Advisory Services to provide our members with the support they need to make an informed decision about their pension in the context of their personal financial picture and life circumstances. It is our role to ensure they have a better understanding of the options they have and the impacts their decisions can have on their financial security in retirement. We believe it is important to help our members avoid costly mistakes that could negatively impact their retirement security.

To help our members in this way, we need to be more than pension experts. We now have Client Service Advisors who are designated Certified Financial Planners® (CFP), or have the Canadian Institute of Financial Planning’s Registered Retirement Consultant® (RRC) accreditation and are in the process of completing their CFP designation.

How has Advisory Services been received?

We are thrilled with the engagement and feedback we have received. In our first year, our Advisors helped close to 2,500 members navigate critical pension decisions and all five of our in-house Advisory Workshops were fully registered. To us, this response validates what a strong need there is to understand and navigate pension decisions. I believe our client satisfaction scores also reflect that, with our member satisfaction scores hitting a record high this year.

Our Advisory Services offering has also piqued interest within the industry. We’re being asked to speak about what we’re doing and why we’re doing it. We truly believe Advisory Services is filling a significant need for our members and are thrilled that they are responding so well and taking advantage of this important value-added service.

When should members start thinking about retirement and how the PSPP may help them achieve their financial goals?

The reality is that most people don’t start planning for retirement until it’s on the horizon and members often don’t understand that their decisions today impact their retirement reality tomorrow. That’s why it’s really important to start thinking about retirement planning early on. Our suite of online tools, including our Pension Estimator and online Retirement Planner, are a good place for members to start to understand how their pension fits into their overall plan and to see if they’re saving enough for their retirement plans.

Once members have used these tools and reviewed the information available online, they can book a 1-on-1 with our Client Service Advisors, who can help them understand how decisions about their pension can impact their financial future. I would strongly recommend that members speak to an Advisor if they’re navigating a pension issue that requires larger financial analysis, such as determining if they’ll have enough income in retirement, deciding whether purchasing or transferring pension credit makes sense for them or choosing a retirement date. Advisors take the time to understand a member’s personal financial situation and goals so that they can equip the member with information to make the best decision about their pension. Advisors won’t make decisions for members – they will provide valuable counsel and clear explanations of the impact of their choices and support members in making good decisions about their pension.

Why do you feel it’s important for OPB to continue to invest in the member experience?

Everything we do is ultimately about providing our members with a secure pension and a superior client experience. At OPB, we pride ourselves on providing world-class client service to our members, a fact that recently was recognized by CEM, an international pension administration benchmarking company. In 2014, OPB was ranked as one of the top five out of 77 globally ranked pension administrators. Whether it’s investing in new online services to give members access to information and interactive programs, advisory staff on standby who can help them navigate complex pension decisions, or digital communication channels that fit with their lives, we’re constantly looking at how we can provide better and more meaningful ways for our clients to experience the pension promise.

OPB is active within the pension and retirement income industry. Why is that important?

At OPB, we believe that everyone should have access to a pension. To that end, we believe that a sound retirement income system is critical to ensuring that Canadians have access to a pension and can retire with dignity. We feel it’s important that we participate in discussions and debates to ensure that important messages about employer-sponsored pension plans are delivered. For example, we want to ensure the public as well as government and business decision-makers understand that well-designed, well-run defined benefit and defined benefit-like or shared-risk plans remain the best option for delivering efficient, affordable and sustainable retirement income. Not only do these plans provide members with a secure retirement income, but they also play an important role in stimulating our economy by providing pensioners with disposable income that is pumped back into the economy – and they provide an important ready source of reliable long-term capital for the markets.

We continue to advocate strongly for the defined benefit (DB) pension plan model and DB-type arrangements that are sustainable and could be made accessible to a broader range of working Canadians. Shared-risk plans, in particular, retain the best features of the DB model, but spread the risk of unfunded liabilities between members and plan sponsors, as all public sector pension plans already do.

We believe it’s important to ensure that working Canadians have adequate income in retirement, which is why we continue to promote viable retirement systems and the importance of long-term financial planning in a wide array of public, private and government forums.

In 2015, OPB’s Investments team continued to generate stable investment returns in an increasingly challenging environment. The team successfully managed through turbulent economic conditions by advancing its in-house asset management and building relationships with like-minded investment partners.

In the following interview, Jill Pepall, OPB’s Executive Vice-President & Chief Investment Officer (EVP & CIO), offers her outlook for the coming year. More specifically, she talks about the benefits of asset pooling and how OPB’s investment strategies position the Plan to take advantage of the expected continuation of market volatility in 2016.

In 2015, you beat your benchmark rate of return. To what do you attribute this success?

OPB’s success in 2015 can be attributed primarily to our timely Tactical Asset Allocation (TAA) decisions, the strong performance of our Real Estate portfolio, and the flexibility to leverage in-house expertise to take advantage of changing market conditions across all asset classes.

Why would an investor want to look at both absolute and relative returns when describing the success of an investment? Looking back on 2015, why is this especially relevant?

Monitoring both absolute and relative returns is important because it provides two different perspectives: assessing market conditions and evaluating the individual manager’s ability. Absolute return (i.e., the actual return) is driven, in large part, by the financial markets. For example, during stock market rallies, absolute return will tend to be higher than when equity markets are declining, and vice versa. Relative return (i.e., OPB’s actual return (6.14% in 2015) compared to the Strategic Asset Allocation (SAA) benchmark return of 5.37% for the same period) tells us if Management is taking advantage of the market conditions, and speaks to the value-add that is generated regardless of whether financial markets are up or down. This difference is important in a year like 2015, when markets were challenging and volatility was high. In 2015, major global equity markets were weak and interest rates remained low. Although this impacted the absolute rate of return, on a relative basis, OPB was able to take advantage of the market volatility, and we added value by exceeding the benchmark return by 77 basis points.

In 2017, OPB intends to implement the recently announced Government of Ontario asset pooling initiative with the Workplace Safety and Insurance Board (WSIB). How can larger asset pools benefit the PSPP and its members?

The objective of the asset pooling initiative is to create and operationalize a new world-class investment manager, the Investment Management Corporation of Ontario (IMCO), that will provide fiduciary, cost-effective investment expertise to the PSPP and WSIB initially, as well as to other broader public sector (BPS) pension plans and entities in Ontario that wish to participate. The larger scale that will be achieved by pooling BPS assets will permit access to larger investment opportunities in a wider array of asset classes. Other expected benefits from asset pooling include:

• higher risk-adjusted investment returns;
• lower investment management fees and expense ratios through an optimal combination of internal investment management and a larger asset base with external managers; and
• enhanced research and risk management supported by leading-edge information technology and expertise.

What’s important to note for the PSPP and its members is that ownership of the assets and pension obligations of the Plan are not being transferred to IMCO. Both will remain with OPB, as will OPB’s investment philosophies and policies as well as its asset allocation strategies. This will preserve the important interrelationship between the Plan’s assets and liabilities. What will change are the management of the Plan’s assets and the expectation of higher returns and lower relative investment costs in the future. For more information about asset pooling, click here.

Why is working with trusted partners such an integral part of OPB’s investment strategy?

In order to achieve strong results, building relationships with like-minded partners is critical. This approach helps OPB gain access to high-quality investment opportunities; enables us to leverage our partners’ expertise in particular industry segments or geographic areas, leading to more informed and ultimately better investment decisions; and encourages the building of long-term, mutually beneficial relationships through which we are able to gain access to research on industry developments, market intelligence and investment trends.

OPB looks for like-minded partners who share a common approach and philosophy toward investing and understand the responsibility of being a fiduciary. This helps ensure we share a similar strategy for value creation and improves the alignment of interests with our partners.

Ultimately, OPB’s culture is one that values trust, collaboration and accountability, and we look for partners that share similar values.

Why is private markets an important part of OPB’s diversified investment strategy? Why are you focused on growing it?

Given OPB’s long-term investment horizon, investing in more private market assets is a natural way to enhance investment returns while adding diversification away from the more volatile public markets. Real assets (infrastructure and real estate) help protect the Plan from volatility because a larger proportion of their returns are in the form of ongoing stable cash flows. Private equity offers attractive risk-adjusted returns and allows improved diversification by asset type, industry and geography. Although fees can be higher for some private market investments, these are offset by higher net returns. In addition, privately negotiated transactions may offer better rights, protections and governance than are available in the public market.

The 2011 SAA first introduced Infrastructure and Private Equity to OPB’s portfolio and increased the allocation to Real Estate. Since then, our 2014 triennial SAA review increased allocations for Infrastructure to 10% and Private Equity to 5%, and confirmed Real Estate’s allocation as 23% (net of financing).

How does OPB incorporate Environmental, Social and Governance (ESG) considerations into its investments?

OPB believes that supporting ESG initiatives will improve corporate transparency and disclosure practices; enable long-term investors, such as OPB, to better evaluate investment return–risk trade-offs; and ultimately support OPB’s efforts to achieve the Plan's objectives. There is strong evidence that improved ESG engagement can have a positive impact on investment portfolio performance. Companies that follow the principles of good governance have less risk and generate higher long-term value for their shareholders. Supporting initiatives that promote corporate transparency allow for improved information flow, which increases the ability to better assess a company’s risks and make a more informed investment decision.

OPB adopts a pragmatic approach to integrating ESG considerations into its investment policies and procedures. Some examples of actions taken in 2015 include:

• Collective engagement: OPB became a signatory to the United Nations–supported Principles of Responsible Investing, an important forum for collective engagement with companies and other enterprises where OPB believes improvement in disclosure practices and other ESG activities is necessary; and
• Proxy voting: We developed our own proxy voting strategy, which incorporates ESG considerations, among other relevant factors, into our voting of publicly traded securities. OPB views proxy voting as an important tool to encourage companies and other enterprises to provide adequate disclosure to shareholders relating to ESG factors, policies and initiatives.

It is also important that factors such as ESG are incorporated in a manner that supports OPB’s overriding fiduciary responsibility to act in the best interests of Plan beneficiaries and for the long-term sustainability of the Plan.

What other important goals or achievements did the Investments team deliver in 2015?

OPB’s core investment goals for 2015 were:

• optimizing the implementation of our SAA;
• continuing to build on in-house expertise and management of assets; and
• enhancing our investment risk assessment and analysis as well as advancing our contribution to asset management.

Optimizing the implementation of our SAA
The Investments team is executing on its multi-year plan of moving to an investment portfolio with a greater exposure to private markets. In 2015, all three private market asset classes exceeded their phase-in target weights. More impressively, during the building and deployment phase of the newer infrastructure and private equity asset classes, OPB has been able to invest directly in mature funds and in assets, avoiding paying fees to managers before they have actually made investments – a situation that can result in lower returns in the early years of a fund’s existence.

Continuing to build on in-house expertise and management of assets
OPB enjoyed success in 2015, selectively bringing the management of some of our public markets assets in-house from external managers (Internalization Program). The Internalization Program provides value-added portfolio management, while lowering costs and providing greater control and transparency. As part of the program, OPB performs a rigorous cost/benefit analysis and ensures back-office capabilities are in place prior to launching an internal mandate. Specifically, OPB launched a liquidity-based money market mandate designed to facilitate smaller funding requirements and a market-neutral portable alpha mandate designed to enhance fixed income returns with similar or lower risk.

Enhancing our investment risk assessment and analysis as well as advancing our contribution to asset management
As OPB moved forward with the Internalization Program, it became increasingly important to advance and strengthen our investment risk assessment and reporting capabilities. Significant strides were made in 2015 with our in-house risk monitoring and measurement processes. Key successes included incorporating private markets investments into the risk analysis and enabling OPB to effectively review the impact of potential investment decisions on the Plan’s risk positions. Another successful enhancement to the in-house risk tool is its ability to assess and manage Surplus at Risk, allowing OPB to measure the impact of portfolio decisions on risk as it relates to the Plan’s liabilities.

In light of ongoing volatility, what is your view/OPB’s perspective on emerging markets? What factors will you be looking at to gauge the success of these investments in future years?

Investing in emerging markets is a long-term strategic decision to benefit from the relative wealth and growth shift from developed to developing economies. Maintaining a significant exposure to these emerging market economies provides a return-enhancing complement to other assets and strategies currently employed by the Plan. Our Emerging Markets portfolio is structured to benefit from various uncorrelated strategies. These range from working with investment managers who have a focus on capital preservation; to structuring complementary investment strategies; to allocating to satellite strategies such as small cap, China A-Shares and local emerging market debt. Since emerging markets tend to be inefficient and volatile, active management can provide the opportunity to exceed the Plan’s benchmark return with lower risk. At the present time, valuations of emerging market assets are relatively cheaper than developed markets and currently provide a good opportunity for the Plan.

What is your investment outlook for 2016?

There are a number of factors currently in place that are contributing to a reduction in global liquidity. After a historically lengthy period of financial easing, the U.S. central banking authority made its first attempt at raising or normalizing its policy interest rates in late 2015, and China continues to spend reserves to manage an orderly decline in its currency exchange rate. A historic collapse in energy prices has led to disarray in global debt capital markets, which were used to finance high-cost energy solutions. As global liquidity has reduced, so has the appetite for risk assets. The effective withdrawal of liquidity has brought about elevated market volatility that will likely remain in place for the foreseeable future. These circumstances, when coupled with relatively expensive valuation levels for equities, make the 2016 investment horizon very challenging – not dissimilar to the latter half of 2015.