The Healthcare of Ontario Pension Plan is reporting an annual return of 9.38 per cent for 2023, partly due to the performance of equities and fixed income, says Michael Wissell, chief investment officer at the HOOPP.
The investment organization finished the year with $112.6 billion in net assets, compared to $103.7 billion and a return of negative 8.6 per cent at the end of 2022.
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Despite the economic volatility seen throughout the year, the plan saw positive returns across all asset classes with the exception of real estate (negative 6.5 per cent). Private equity (15.9 per cent) and public equities (15.71 per cent) offered the highest returns, while fixed income returned 4.28 per cent, a substantial improvement from negative 17.8 per cent in 2022.
Wissell says the investment organization has favoured a dynamic approach to fixed income exposure, which helped navigate a volatile 2023. “When yields are very low, you want to own less of them, even if you’re a liability-driven investment shop as we are. But when rates move higher you can afford to put a little bit more of those on your balance sheet. This is the approach we’ve been taking.”
The returns from private credit (4.55 per cent) were surprising, he says, noting 2023 was the first year the HOOPP made a formalized strategic five per cent allocation to the asset class. “We didn’t expect to jump over to such a strong result in year one of having that in our balance sheet. . . . [However] it makes sense with the higher cost of capital [and] the moving interest rates that we’ve seen over the last few years.”
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At the end of 2023, more than half (55 per cent) of the HOOPP’s geographic exposure was tied to Canadian assets, followed by the U.S. (24 per cent), Europe (12 per cent), Asia-Pacific (seven per cent) and other (two per cent).
Last week, a group of nearly 100 business leaders signed an open letter calling on federal and provincial finance leaders to increase domestic investments by Canadian institutional investors to bolster the economy. At a time when Canadian pension plans are facing questions about how involved they should be with the growth of domestic markets, Wissell says the HOOPP strikes “the right balance” by holding more than $60 billion worth of domestic assets while striving to build a global portfolio.
“We invest in Canadian assets because they represent good investment opportunities. We know [the] risk profile here [and] understand what’s going on here very effectively. . . . It’s important that we both diversify and find the best risk-adjusted rewards that we can find. And for us that means Canadian investments.”
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