Using Benchmarks to Ensure Our Effectiveness

At Ontario Teachers', we measure our investment performance on an actual basis and against a range of benchmarks. Benchmarking allows board members, plan members and employees to evaluate the effectiveness of our investment strategies and activities relative to the risks taken.

On a total-fund basis and for each asset group, we work to surpass the relevant benchmarks, and when we do we describe that as "value-added" performance.

As long-term investors, the most relevant measure of our performance is over several years. So, in addition to providing one-year returns, we also track four- and 10-year returns along with returns since 1990 – when we began our investment program – all on an actual basis and against the benchmark.

Investment Performance

(percent)

  2016 2015 4-year 5-year 10-year Since Inception
Total Return 4.2 13.0 9.9 10.5 7.3 10.1
Benchmark 3.5 10.1 8.2 8.7 6.3 7.9
Return above benchmark (Canadian $ billions) $1.3 $4.2 $10.1 $12.3 $14.2 $36.9

 

Benchmarks for our various asset groups are shown in the table below.

Benchmarks Used to Measure Fund Performance

  Benchmark
Fixed Income Custom Canada Bond Universe
  Custom Canada Long Bond Universe
  Custom Provincial Long Bond
  Custom Barclays Capital U.S. Treasury Index
  Custom Barclays Corporate Baa 5-10 Year Index
  Custom U.S. Interest Rate Swaps and Related Swaptions Benchmark
  Custom Canada Real Return Bond
  Custom Barclays Capital U.S. TIPS Index
  Custom Emerging Markets Local Currency Sovereign Debt Benchmark
  FTSE TMX Canada 91 Day T-Bill
  Custom U.S. OIS Index
Canadian Equity S&P/TSX 60
  Custom Long Term Canadian Equity
  Custom Canadian Enhanced Equity
Non-Canadian Equity S&P 500
  MSCI All Country World ex Canada
  MSCI Emerging Markets
  MSCI Emerging Markets ETF
  Custom Non-Canadian National Indices
  Custom Non-Canadian Enhanced Equity
  Custom MSCI Global Index
  Custom Long Term Non-Canadian Equity
Real Assets 5.0% + IPD Canada Capital Growth (Real Estate excluding Brazil)
  Custom Real Estate Debt Benchmark
  Local CPI plus 4% plus country risk premium
(Infrastructure and Real Estate Brazil)
Natural Resources NCREIF Timberland Index (U.S. Timberland)
  Local CPI plus 4% plus country risk premium (Sector Investment and non-U.S. Timberland)
  Custom Natural Resources Benchmark
  Goldman Sachs Commodities Index
  Goldman Sachs Commodities Index 3 Month Forward
  Custom Commodities Hedge
Total Fund Custom Canadian CDOR Index
  Custom U.S. LIBOR Index
  Custom U.S. T-Bill Index
  Custom Local OIS Index (Canada, U.S.)
  Custom Currency Overlay
  Custom Equity Hedge

 

Investment Costs

Managing a successful investment program involves costs in areas such as salaries and benefits, fees and commissions and research. We are committed to cost effectiveness and view certain expenditures as necessary to achieve long-term performance requirements.

In 2016, total investment costs were $451 million or 27 cents per $100 of average net assets, compared to $429 million or 27 cents per $100 in 2015.

Investment returns are calculated net of trading costs, investment management expenses and external management fees, and are calculated in Canadian dollars.