MPF · Benchmark Bloomberg Aggregate Bond Index
Mandate
The fund seeks better than benchmark risk and return by investing in securities that provide superior total return. It manages fixed income actively, using exchange traded funds and, where the allocation allows a diversified portfolio at reasonable cost, individual bonds. Equity securities with fixed income characteristics, such as REITs and preferred shares, may also be considered.
The approach
Fixed income returns come from a small number of identifiable decisions: how sensitive the portfolio is to the level of interest rates, where it sits along the maturity spectrum, how much credit risk it takes and whether it is paid enough for it, and which parts of the market offer better value than the index. The committee makes each of these deliberately rather than by default. A move of a few basis points that would be immaterial to an equity portfolio is a result here.
MPF is the only sub-fund not benchmarked to the S&P 500, and it is the reason the fund's blended benchmark includes fixed income. Its lower sensitivity to equity markets reduces the risk of the fund as a whole.
In the annual report
The annual report sets out how each year's committee positioned the portfolio on rates and credit, and how it performed.