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Ontario Teachers’ delivers strong investment performance in 2021

2021 Highlights:

  • One-year total fund net return of 11.1%, driven by strong returns from private equity, inflation sensitive and innovation investments
  • Record annual value add to the fund of $5.5 billion
  • The plan is fully funded for a ninth straight year
  • Annualized total-fund net return over ten-years of 9.3% and since inception return of 9.7%
  • Diversified investments globally, acquiring nearly 50 private assets across five continents
  • Invested or committed over $5 billion into additional green or transition assets

 

TORONTO (March 14, 2022) -- Ontario Teachers’ Pension Plan Board (Ontario Teachers’) today announced a one-year total-fund net return of 11.1% for the year ended December 31, 2021, exceeding its benchmark by 2.3%. This outperformance relative to its benchmark resulted in a record annual value add of $5.5 billion. Net assets grew to $241.6 billion.

These results contributed to the plan being fully funded as at January 1, 2022, with a $17.2 billion preliminary funding surplus. This marks the plan’s ninth consecutive fully funded year, underscoring the long-term financial health and sustainability of the plan.

“We delivered strong results for our members despite the challenges brought about by a second year of a global pandemic,” said Jo Taylor, President & Chief Executive Officer. “We had excellent investment performance, maintaining our fully funded status, and delivered a high level of service for our members – all while making meaningful progress on our new multi-year strategy.”

As at December 31, 2021, Ontario Teachers’ delivered an annualized total-fund net return of 9.7% since inception in 1990 and five- and 10-year annualized total-fund net returns of 8.4% and 9.3%, respectively.

Investment Performance

Time period (all as at December 31, 2021)

One-year

Five-year

10-year

Since inception

Total-fund net return

11.1%

8.4%

9.3%

9.7%

 

“Our diversified portfolio had an excellent performance in 2021 with strong returns across private assets, particularly in private equity, infrastructure, inflation sensitive assets and the Teachers’ Innovation Platform,” said Ziad Hindo, Chief Investment Officer. “Our efforts to balance and diversify our portfolio through increasing allocations to credit, real assets and inflation-sensitive assets proved timely, and positions us well to weather the potential impacts of various economic outcomes including the current inflationary environment.”

The performance relative to the benchmark was driven largely by outperformance by our private equity, infrastructure, credit and inflation sensitive asset classes, which all meaningfully exceeded their individual benchmarks.

Portfolio Performance by Asset Class (all figures as at December 31)

Fund returns by asset class are reported in the table below.

Fund returns (%)1

Actual

Benchmark

Actual

Benchmark

 

2021

2021

2020

2020

Equity

 

 

   

Public equity

9.0

13.1

15.2

11.2

Private equity

29.0

17.5

13.5

12.3

 

21.3

15.5

13.2

12.1

Fixed income

 

 

   

Bonds

(9.4)

(9.4)

24.6

24.5

Real-rate products

(1.4)

(1.4)

12.8

12.8

 

(6.3)

(6.3)

20.7

20.6

Inflation sensitive

 

 

 

 

Commodities

7.9

7.9

4.3

4.2

Natural resources

28.1

24.1

(11.2)

(8.5)

Inflation hedge

8.0

8.0

(4.4)

(4.4)

 

11.4

10.9

(2.4)

(1.6)

Real assets

 

 

   

Real estate

2.5

8.8

(13.7)

(4.7)

Infrastructure

7.9

1.2

2.6

7.5

 

5.4

5.3

(7.6)

(0.1)

Innovation2

39.0

39.0

16.3

16.3

Credit

3.5

1.2

2.6

1.5

Total-fund net return

11.1

8.8

8.6

10.7

 

1 The total-fund net return is calculated after deducting transaction costs, management fees and investment administrative costs. Asset-class returns are before deducting investment administrative costs.

2 Benchmarked to actual return during an incubation period, after which it will be measured against an active benchmark.

Detailed Asset Mix (all figures as at December 31)

Asset Class

$ billions

%

$ billions

%

 

2021

2021

2020

2020

Equity

 

 

   

Public equity

27.2

11%

42.4

19%

Private equity

55.1

23%

41.8

19%

 

82.3

34%

84.2

38%

Fixed income

 

 

   

Bonds

33.3

14%

17.2

8%

Real-rate products

11.9

5%

17.4

8%

 

45.2

19%

34.6

16%

Inflation sensitive

 

 

   

Commodities

26.5

11%

17.7

8%

Natural resources

9.4

4%

7.4

4%

Inflation hedge

12.1

5%

11.5

5%

 

 48.0

20%

36.6

17%

Real assets

 

 

   

Real estate

26.3

11%

25.2

12%

Infrastructure

26.1

11%

17.8

8%

Real-rate products

 -  

0%

1.9

1%

 

52.4

22%

44.9

21%

Innovation

7.1

3%

3.5

2%

Credit

24.3

10%

18.0

8%

Absolute Return Strategies

14.9

6%

13.6

6%

Overlay3

(0.5)

0%

0.8

0%

Funding for investments4

(34.7)

(14%)

(18.3)

(8%)

Net investments5

239.0

100%

217.9

100%

 

3 Includes strategies that manage the foreign exchange risk for the total fund.

4 Includes term debt, bond repurchase agreements, implied funding from derivatives, unsecured funding and liquidity reserves.

5 Comprises investments less investment-related liabilities. Total Net Assets of $241.6 billion at December 31, 2021 (2020 - $221.2 billion) include Net investments and other net assets and liabilities of $2.6 billion (2020 - $3.3 billion).

“Our global investment teams had an active year, making nearly 50 direct or add-on private investments across five continents and committing to ambitious interim emission reduction targets,” added Taylor. “Looking forward, we are well positioned for continued global growth and to meet our strategic goal of reaching $300 billion in net assets by 2030.”

Transactions Highlights

Ontario Teachers’ manages approximately 80% of its assets internally, with a focus on deploying capital into active strategies. During 2021, the fund diversified investments globally and acquired nearly 50 private assets across five continents. Highlights from the year include:  

Capital Markets:

  • Alongside partner Incus Capital, provided a corporate loan of €140 million to Capital Energy, an integrated renewable energy operator in the Iberian Peninsula;
  • Provided capital to several syndicates at Lloyd’s, the world’s leading insurance and reinsurance marketplace, through the London Bridge Risk (LBR) PCC.

Equities:

  • Acquired a 33.4% interest in Greenstone, a leading insurance distributor focused on developing life and general insurance products for Australians and New Zealanders;
  • Announced plans to acquire HomeQ, the parent company of HomeEquity Bank, Canada's leading bank offering reverse mortgage solutions;
  • Made a significant strategic investment in Mitratech, a leading provider of legal and compliance software;
  • Became an anchor investor funding U.S. private equity firm TPG Rise Climate Fund, which works with businesses who are developing innovative climate solutions. 

Infrastructure:

  • Acquired a 40% holding in Caruna, Finland’s largest electricity distribution company;
  • Jointly acquired a 100% interest in the Canadian district energy operations owned by Enwave Energy Corporation for C$2.8 billion on an enterprise value basis;
  • Acquired a 50% interest in a portfolio of high-quality wind, solar and energy storage assets across the United States from NextEra Energy Resources, LLC;
  • Became a founding investment partner of the Brookfield Global Transition Fund, a global fund dedicated to accelerating the transition to a net-zero economy.

Natural Resources:

  • Became a significant shareholder in GreenCollar, a leading environmental markets project developer and investor across the carbon, water quality, biodiversity and plastics markets in Australia.

Real Estate:

  • Our real estate subsidiary Cadillac Fairview, alongside partner Lincoln Property Company’s residential division, grew their US multifamily fund from US$800 million to US$1.8 billion in equity. The fund will continue to focus on the development and acquisition of high-quality multifamily assets in top US markets.

Teachers’ Innovation Platform:

  • Led a C$375 million Series D fundraising round for ApplyBoard, an online platform that empowers students around the world to access top quality education;
  • Participated in the US$420 million B-1 funding round for FTX Trading Ltd., owner and operator of FTX.COM, a leading global cryptocurrency exchange;
  • Led the US$138 million Series C fundraising for Beamery, a leading talent operating system that helps companies attract, engage and retain top talent.

Climate ambition and investment

As part of its journey to achieve net zero on its investment activities by 2050, Ontario Teachers’ set industry-leading targets to reduce portfolio carbon emissions intensity by 45% by 2025 and 67% by 2030, compared to its 2019 baseline. Our portfolio carbon footprint and progress against these targets will be included in our upcoming annual report.  

“We have a multi-faceted climate strategy that is rooted in driving real-world emission reductions,” said Hindo. “Our strategy reflects our commitment to be accountable and to act immediately to reduce the environmental impact of our portfolio.”

Ontario Teachers’ has more than $30 billion in green investments in its portfolio and completed several transactions in 2021 that contribute to a net-zero carbon future. Since announcing its net-zero commitment in January 2021, it has invested or committed over $5 billion into additional green or transition assets.

Investment costs

Ontario Teachers’ is committed to cost effectiveness and both manages and links its costs to the investment value creation process. Total investment costs including administrative expenses, transaction costs and external management fees totaled $2,030 million (91 cents per $100 of average net assets) in 2021, compared to $1,452 million (70 cents per $100 of average net assets) in 2020.

The increase in investment costs  over the prior year was driven primarily by a significant increase in deal volume and transaction size in 2021, higher external management fees including performance fees due to strong investment performance, and higher annual and long-term incentives due to strong total-fund performance.

About Ontario Teachers’

Ontario Teachers' Pension Plan Board (Ontario Teachers') is the administrator of Canada's largest single-profession pension plan, with C$241.6 billion in net assets (all figures at December 31, 2021 unless noted). It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annual total-fund net return of 9.7% since the plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacific region offices are located in Hong Kong and Singapore, and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded as at January 1, 2022, invests and administers the pensions of the province of Ontario's 333,000 active and retired teachers. For more information, visit otpp.com and follow us on Twitter @OtppInfo.

Contact

Dan Madge
Ontario Teachers' Pension Plan
Phone: +1 416-419-1437
Email: media@otpp.com