It's the first decline posted by Vestcor in 13 years, but the losses were well below Canadian industry averages — and that helped boost controversial bonuses earned by Vestcor staff for the second year in a row.

"Our investment returns significantly outperformed most other Canadian pension plans," wrote Vestcor president John Sinclair in the annual report.

Vestcor managed $19.9 billion in New Brunswick government employee pension and other funds, as of the end of December. That's down from $21 billion one year earlier. It's a change affected by a number of factors, the most significant of which is the return earned on fund investments.

Among the assets losing value in 2022 was the pension fund belonging to New Brunswick public servants, which dropped by $534 million to $8.8 billion, and the New Brunswick Teachers' Pension Plan, which shed $458 million to settle at $6.5 billion.

Last year was a tough one in most financial markets. The Toronto Stock Exchange composite index fell 8.7 per cent over 12 months.

New Brunswick's former auditor general, Kim Adair, told MLAs in 2021 she wanted the authority to audit Vestcor and what was then $4.4 million per year in bonus pay. She was refused and bonuses have since doubled. (Michel Corriveau/Radio-Canada)

According to the Royal Bank, declines like that helped push investments managed by pension plans across Canada to their worst results since 2008.

In January, Niki Zaphiratos with the bank's investor and treasury services division called 2022 "a challenging year for pension asset managers" with the median return earned by defined benefit plans tracked by the bank measured at negative 10.3 per cent.

In its annual report out this week Vestcor reports its 2022 investment returns were significantly better than that at negative 3.63 per cent, which it credited to its long established conservative investment philosophy and skilled management.

The Royal Bank of Canada said the median investment loss of Canadian pension funds in 2022 was 10.3 per cent. Vestcor's loss was significantly less severe at 3.63 per cent. (Don Pittis/CBC)

It's the organization's best result in relation to industry averages since it switched its year-end to Dec. 31 in 2016

Outgoing Vestcor chairperson Michael Walton said the organization's "low-risk" approach and "strong value-added returns" generated by its in-house expertise were the two factors preventing larger losses.

Investment targets or "benchmarks" set by Vestcor's board were exceeded during the year by more than $500 million, according to the organization.

Consequently, employees were rewarded with a $459,900 increase in the pool of funds used for bonus pay. That allowed a record $9 million to be awarded in 2022.

The Toronto Stock Exchange's composite index fell 8.7 per cent in 2022, a sign of how difficult the financial environment was for investors during the year, including pension funds. (Mark Blinch/Reuters)

Vestcor's top five investment executives were allotted $3.7 million of the total, including $1.26 million in bonuses to Sinclair. That amount is more than triple his base salary of $375,057.

Vestcor has consistently defended its bonus pay program as standard in the investment industry and necessary to help recruit and retain quality employees and incent good performance.

In an email Thursday, Sinclair said the bonus program is "annually reviewed and approved" by a specialized committee of Vestcor's board and was professionally designed in consultation with an independent compensation expert.

"Vestcor's active investment approach has realized strong success in adding significant value-added returns," wrote Sinclair about what has been driving bonuses upward.

Bonus pay earned by Vestcor employees has more than doubled since former New Brunswick auditor general Kim Adair raised concerns in 2021 about her office not being allowed to review them and the results they are based on.

John Sinclair, president of Vestcor, speaking to MLAs in September 2021. He says the organization's bonus program has been professionally constructed, meets industry standards and is reviewed annually. (Government of New Brunswick)

Vestcor was originally a Crown agency known as the New Brunswick Investment Management Corporation, but was reconfigured, renamed and given its independence in 2016.

It's now jointly owned by the province's two largest public pension plans serving civil servants and teachers.

It also oversees the retirement plans of other government employees, including hospital workers, nurses, Crown corporation employees, provincial court judges and MLAs.

Vestcor also manages other investment accounts, including University of New Brunswick endowment funds, retirement accounts for other organizations like the City of Fredericton, and nuclear waste and decommissioning funds for NB Power.

Adair argued "the significant amount of funds from public sources Vestcor manages" and its "extensive government-entity client base" make its operations a public interest concern.

"The Auditor General should have unrestricted access to audit the reasonableness of Vestcor's incentive program," Adair wrote in her report on the matter in early 2021.

But Vestcor has maintained it is an independent body not subject to the auditor general's authority and to date the New Brunswick government has supported that view.

The body's investment results in relation to national averages in 2022 help to offset some weaker results in previous years. Including 2022, Vestcor has posted results among the top half of the Royal Bank's ranking of pension plans three times since 2016. It's been in the bottom half four times.