September 06, 2017
Ontario Teachers' Pension Plan (Ontario Teachers') today announced its net assets reached $180.5 billion as of June 30, 2017, a $4.9 billion increase from December 31, 2016. The total-fund gross return was 3.7% (3.6% net of investment administrative expenses), reflecting $6.4 billion of income generated by investments.
The five- and ten-year gross returns as at December 31, 2016 are 10.5% and 7.3% respectively. Since its inception in 1990, the Plan's annualized gross return as at December 31, 2016 was 10.1%.
"At Ontario Teachers' our investment portfolio is designed for stable performance in a variety of market conditions," said Ron Mock, President and Chief Executive Officer. "Our international team of investment professionals is focused on identifying opportunities to help deliver sustainable pensions to our members."
Ontario Teachers' continued to execute on its long-term strategy based on three pillars: total-fund returns, value-add (above benchmark) returns, and risk management. Key initiatives in this area include the launch of a department responsible for developing global investment relationships, and the centralization of trade and treasury functions to improve efficiency, support innovation and decrease execution costs.
It also involved the implementation of Ontario Teachers' previously-announced asset class realignment to better reflect the behaviour and risk-profile of its investments, as follows:
"Returns in the first half of 2017 were driven by strong performance from global public equities, infrastructure, private equity and government bonds. Overall returns were offset by the impact of currency and declining commodity and natural resource prices," said Chief Investment Officer Bjarne Graven Larsen.
Ontario Teachers' takes a disciplined approach to managing the portfolio through a variety of different market conditions. A forward-looking and inclusive focus across the organization helps ensure a diverse allocation of risk with appropriate and aligned interest rate, inflation, foreign exchange and equity exposures.
Gross asset return in local currency was 4.5%. The Plan invests in 37 global currencies and in more than 50 countries, but reports its assets and liabilities in Canadian dollars. In the first half of 2017 the appreciation of the Canadian dollar had an impact of - 0.8%, or -$1.4 billion, on the Plan's total-fund gross return.
In June, as a result of the preliminary surplus reported as of January 1, 2017, the Ontario Teachers' Federation (OTF) and the Ontario government, which jointly sponsor the pension plan, announced they will use surplus funds to restore full inflation protection for retired members and decrease contribution rates by 1.1% for active members. Both changes are effective January 1, 2018.
*Net of trading costs, investment management expenses and external management fees, but before Ontario Teachers' investment administration expenses.
About Ontario Teachers'
The Ontario Teachers' Pension Plan (Ontario Teachers') is Canada's largest single-profession pension plan, with $180.5 billion in net assets at June 30, 2017. It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annualized gross rate of return of 10.1% since the Plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacific region office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario's 318,000 active and retired teachers. For more information, visit otpp.com and follow us on Twitter @OtppInfo.