Real estate drags OMERS 2009 performance down

The Canadian pension reported above-benchmark returns for its investments in private equity and infrastructure last year, with 13.9% and 10.9% respectively. Real estate returned just 1.3% in 2009.

Real estate is continuing to pull down the performance of many pension funds, with the Ontario Municipal Employees Retirement System reporting gains of just 1.3 percent for the asset class in 2009.

The performance of our private equity and infrastructure investments also provided very strong returns, reinforcing our decision to continue to expand our holdings in the private market asset classes.

Michael Nobrega, OMERS’ president and chief executive officer

The C$47 billion (€33.3 billion; $45.1 billion) pension had a benchmark for real estate of 6.7 percent in 2009, but its property management arm – Oxford Properties – failed to mirror such gains, reporting instead returns of 1.3 percent last year. In 2008, OMERS reported gains of 6 percent for its real estate assets against a benchmark 8.3 percent.

Unveiling its 2009 year-end results, OMERS said it experienced an overall return of 10.6 percent for all asset classes against a target of 12.1 percent. In 2008, the pension returned -15.3 percent against a benchmark of -13.2 percent.

Gains in OMERS’ private equity, infrastructure and capital market portfolios boosted the Canadian pension fund, with OMERS Private Equity group reporting returns of 13.9 percent in 2009, compared to a benchmark of 6.7 percent. Borealis Infrastructure, the group that manages the pension’s infrastructure investments, returned 10.9 percent against a benchmark of 9 percent, while OMERS Capital Markets, the public investments arm of the pension, reported returns of 11 percent against a 13.5 percent target.

OMERS’ Strategic Investments, which targets global co-investment opportunities across real estate, infrastructure and private equity, was the only portfolio to deliver negative news for the pension, returning -1.2 percent against a targeted return of 10.7 percent.

“The performance of our private equity and infrastructure investments also provided very strong returns, reinforcing our decision to continue to expand our holdings in the private market asset classes,” said Michael Nobrega, OMERS’ president and chief executive officer.

The pension is now valued at C$47.7 billion compared to C$43.4 billion as at the end of 2008. However, Nobrega said the plan’s deficit had increased to C$1.5 billion owing to changes in certain actuarial assumptions making “enhanced investment returns in 2009 and in subsequent years” an important factor in trying to address the deficit going forward.

 

2009

2008

Rate of return

Benchmark

Rate of return

Benchmark

OMERS Capital Markets              

11%

13.5%

-19.5%

-19.5%

OMERS Private Equity               

13.9%

6.7%

-13.7%

13.5%

Borealis Infrastructure             

10.9%

9%

11.5%

9.8%

Oxford Properties                   

1.3%

6.7%

6%

8.3%

OMERS Strategic Investments        

-1.2%

10.7%

n/a

n/a

Total Plan                         

10.6%

12.1%

minus 15.3%

13.2%