Toronto-based pension fund, Ontario Municipal Employees Retirement System said this week its real estate and infrastructure divisions had outperformed their 2010 benchmarks, by 0.86 percent and 1.6 percent respectively.
Announcing its returns for 2010, the pension fund said its total rate of return for the year was 12.01 percent, up from 10.6 percent in 2009. While real estate, which is managed through its Oxford Properties subsidiary, and infrastructure, which is managed through its Borealis Infrastructure company, were outperformers, its private equity division, OMERS Private Equity, missed its benchmark target by 5.84 percent.
Oxford Properties, a real estate development and investment management business formed in 1960 and which has a real estate portfolio of approximately $16 billion, returned 7.51 percent in 2010, ahead of its benchmark of 6.65 percent. The result was also up on its 1.3 percent return in 2009.
Borealis, Canada’s first established infrastructure business formed by a pension fund, returned 10.1 percent, up on its 8.5 percent benchmark but down on its 10.9 percent return last year. The company has invested approximately C$7 billion (€5.2 billion; $7.1 billion) in the asset class since its inception in the late 1990s, which it values today at about C$70 billion. OMERS Private Equity returned 22.21 percent, significantly up on its 13.9 percent return last year but under its benchmark this year of 28.05 percent. OMERS Private Equity currently manages more than $4 billion of investments globally.
OMERS said its net assets had exceeded $53 billion in 2010, $10 billion up since the global financial crisis and $5.5 billion up from 2009. The pension fund, which manages the pensions of more than 400,000 people, said this was because of a policy shift adopted seven years ago to manage more private market investments than public investments. Today, 53 percent of its assets are public market investments while the remainder are private, including real estate, private equity and infrastructure.
“OMERS achieved excellent investment results in 2010, supporting our mission of creating surplus wealth for plan members and sponsors,” said John Sabo, chair of the OMERS Administration Corporation Board of Directors. “Our performance, which stems from our asset mix shift to world-class private market investments, and strong market investment returns driven by the recovery of the global financial markets, reflects our focus on risk-adjusted returns, which is designed to manage volatility and respond to our long-term liability profile.”
In the seven years since OMERS adopted a policy shifting its asset mix more heavily into private market investments, the Plan has earned an annualised return of 8.11 percent which included an investment return of -15.3 percent in 2008. That year meant the pension fund still has a funding deficit of $4.5 billion although OMERS said it expected to reverse that between 2015 and 2020 based on expectations it would achieve average returns of between 7 percent and 11 percent between now and then.