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Teachers’ fund rebounds to $96.4 billion, exceeds benchmark with 13% rate of return, $10.9 billion in earnings

But low interest rates continue to exacerbate funding position

TORONTO - The Ontario Teachers' Pension Plan today announced that its 2009 annual rate of return was 13%, with $10.9 billion in investment earnings, placing the fund 4.2% ahead of its consolidated benchmark. As of December 31, 2009, the fund's net assets totalled $96.4 billion.

"2009 was great from an investment and member service perspective, yet may seem confounding from a funding perspective," said President and CEO Jim Leech. "The fund's preliminary funding valuation shows a $17.1 billion shortfall, resulting primarily from historically low real interest rates, which continue to prevail." A funding valuation assesses the plan's long-term financial health by looking ahead more than 70 years. A funding shortfall means that projected plan liabilities are greater than projected assets.

"The investment team did a first-rate job, turning in one of their best investment years ever, as did our Member Services team, which scored quality service ratings of nine or higher out of 10 in every quarter of 2009," Mr. Leech said.

"We spent 2009 taking care of the business of the plan during the tail end of the financial market crash, while taking advantage of the market turmoil to make some investments that are already starting to pay off, and fortifying the plan for the future," he added.

The fund's Inflation-Sensitive asset class holdings totalled $45.9 billion at 2009 year-end, compared to $44.9 billion at the end of 2008. The Equities portfolio holdings totalled $41.2 billion, compared to $34.9 billion a year earlier. Fixed Income assets, net of related liabilities, totalled $6.4 billion at 2009 year-end, compared to $5.3 billion in 2008.

Mr. Leech cautioned that much of the market rebound last year was the result of a return of confidence in the financial markets and not of true economic growth. "We should not expect this kind of market growth going forward," he warned. "In 2008 and continuing into the first quarter of 2009 we saw a crisis of confidence among investors. It caused market mayhem. After the markets bottomed out in March 2009, confidence edged back up and with that came a return to more reasonable valuations. We expect it will still be some time until true economic growth takes hold."

With $96.4 billion in net assets, the Ontario Teachers' Pension Plan is the largest single-profession pension plan in Canada. An independent organization, it invests the pension fund's assets and administers the pensions of 289,000 active and retired teachers in Ontario.

Listen to Jim Leech's audio message on the plan's results 

PLAY AUDIO FILE (2:23 min., MP3 1.8 MB)

 Transcript (32KB PDF)

See attached Tables and Charts:

  1. Net Investments by Asset Class
  2. 2009 Performance vs Benchmark
  3. Preliminary Funding Valuation

Net Investments by Asset Class

For the years ended Dec.31, $ Billions

  2009 2008
Equities $41.2 $34.9
Canadian 8.4 6.2
Non-Canadian 32.8 28.7
Fixed income $6.4 $5.3
Bonds 13.5 11.5
Absolute return strategies and hedge funds 8.4 14.8
Money market and related liabilities (15.5) (21.0)
Inflation-sensitive investments $45.9 $44.9
Real estate 17.2 16.2
Real-return bonds 18.9 17.4
Infrastructure and timberland 7.9 10.0
Commodities 1.9 1.3
Net Investments $93.5 $85.1

Net investments plus contributions and other net assets (liabilities) equal net assets available for benefits of $96.4 billion at year-end 2009.

2009 Performance vs. Benchmarks
Asset Class Income by asset class Performance vs. Benchmark Percentage of Asset Mix
Total $10.9 billion Return: 13.0%
Benchmark: 8.8%
100%
Equities $7.2 billion Return: 21.4%
Benchmark: 17.2%
44%
Fixed income $1.8 billion Return: 23.6%
Benchmark: -4.8%
7%
Inflation-sensitive investments $1.9 billion Return: 4.0%
Benchmark: 5.4%
49%

Contact:

Deborah Allan
Director, Communications and Media Relations
Ontario Teachers' Pension Plan
(416) 730-5347
deborah_allan@otpp.com