The OPSEU Pension Trust finished 2022 with net assets of $24.642 billion, down 2.2 per cent from the previous year, according to its latest annual results.
“The most important thing is the funded status, which is at 100 per cent,” says Peter Lindley, president and chief executive officer of the OPTrust. “I think it’s quite an achievement to do that in any given year, [so] doing that for 14 years in a row is pretty special.”
The investment organization’s most significant losses were in its public markets allocations. Its public equities portfolio dipped by 17.5 per cent and its liability hedging portfolio, composed of federal and provincial bonds, fell 20.6 per cent. “One of the things we did well was reduce our allocation to fixed income when rates went low [in 2021],” he says. “I wish we’d waited a little longer to buy bonds [in 2022].”
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While it’s difficult to deal with stock and bond values falling together, Lindley says the OPTrust’s long investment horizons helps minimize these issues. “Do I think this is going to continue? In the short term, it could. It will probably return to a more normal situation as interest rates return to where we’ve been used to seeing them.”
The annual results also showed the organization’s performance was buoyed by its alternatives portfolios in 2022. The largest returns were from infrastructure (21.1 per cent) and real estate (15 per cent). In addition, its private equity investments appreciated by 4.8 per cent.
“Different asset classes perform in different parts of the cycle,” says Lindley. “Infrastructure and real estate do well in higher inflation markets. You start to see inflation in the rent you charge. In infrastructure, it’s built into the pricing of tolls or contracts.”
In 2022, the OPTrust also raised its discount rate, from 2.85 per cent to three per cent in real terms. In nominal terms, it rose from 4.85 per cent to five per cent. On an annualized basis, its 10-year returns reached 7.7 per cent. “I try to avoid focusing on the short term,” says Lindley. “We hedge our liabilities and we’ve never been more sustainable — that makes us very happy about the future.”
Read: OPTrust posts 15.3% net return, driven by private equity investments
He’s particularly proud of the OPTrust’s 2022 achievements related to diversity, equity and inclusion. The organization developed an inclusion, diversity and equity toolkit to assist its investment teams in advancing DEI in its portfolios and its stewardship activities.
With more of the OPTrust’s staff able to work at its offices in 2022 than in the previous year, it held a series of employee seminars related to DEI issues. “Those in-office meetings are something that’s really important for us,” says Lindley. “My colleagues have told me they’ve also been meaningful for them and that’s really important to me.”
The OPTrust is also celebrating environmental, sustainable and governance-related successes. In 2022, it released an enhanced climate strategy that integrates considerations from across its portfolio to support its resiliency and adaptability. “We also came out with a net-zero by 2050 target last year,” he says. “It was a bit later than some of our peers, but that’s because we put our homework before headlines. . . . We wanted everything to be in order before we said anything.”
According to Lindley, his biggest concern in 2023 is talent retention. “What really makes us successful is our people. We had a higher turnover of staff last year than we’re used to.”
Read: How OPTrust is designing, implementing an effective ESG strategy