The Healthcare of Ontario Pension Plan ended 2020 with a funded status of 119 per cent and posted a return of 11.42 per cent over the course of the year, according to a press release.
That figure was lower than the 17.14 per cent return delivered in 2019, but Jeff Wendling, the plan’s president and chief executive officer, says he’s pleased with the results given the challenges wrought by the ongoing coronavirus pandemic. “It was a very challenging year with everything that went on, so to come through with such strong results is great.”
The plan’s total assets also crossed the $100-billion threshold for the first time, rising from $94.1 billion at the beginning of 2020 to $104 billion at the close of the year. Wendling, who took over the reins at the HOOPP from industry veteran Jim Keohane last April, says the plan’s robust funded status placed it in a strong position to weather the financial storm that hit as a result of the World Health Organization declaring a global pandemic mere weeks before he started his new job.
The HOOPP’s funding ratio never sank below 100 per cent, even as markets crashed in the early days of the pandemic, freeing up the investment team to take advantage of a strong liquidity position.“As things sold off and we started to see opportunities in equities, we had the cash to start buying assets,” Wendling says.
Despite market volatility, the HOOPP’s public equity portfolio fared particularly well in 2020: Canadian equities delivered a return of 8 per cent, while U.S. equities returned an even more impressive 18.6 per cent. The fund also sold off a portion of its significant bond holdings as yields dipped to all-time lows in the first half of 2020.
“We locked in sizeable gains and redeployed to other assets to generate returns,” he says.
The HOOPP’s 10-year annualized rate of return now stands at 11.16 per cent — well above the fund’s 8.8 per cent benchmark — and Wendling says the HOOPP’s consistently solid performance played a role in the board of trustees’ recent approval of benefit improvements.
In 2020, retired and deferred members received a 2.25-per cent cost of living adjustment to keep their pensions up with inflation, while some active plan members are now set to receive an increase to their annual lifetime pension.
From April 1, active plan members will get a retroactive boost for their contributory service in the last three years that could raise their lifetime pension by up to $426 annually when they hit retirement. “Because we ended the year in a strong funded position, that was something that we could do for our members,” Wendling says.