Amid slow global growth, chronically low interest rates and declining commodity prices, the Healthcare of Ontario Pension Plan (HOOPP) saw its return for 2015 slide to 5.12%, down from 17.7% in 2014. Despite this decline, its funded status has strengthened.

The plan’s 10-year return was 9.32%, down from 10.27% in 2014.

Read: HOOPP assets jump 17.7%

“We suspected 2015 [would] be a challenging year and that’s how it played out,” said Jim Keohane, HOOPP president and chief executive officer, speaking at a press conference in Toronto on March 3. It was a year of “very high volatility and low returns,” he added.

Keohane cited pressures such as slowing growth in China, structural problems in Europe, regulatory requirements for the financial firms serving the pension plan and sliding commodity prices.

Read: 2015 Top 100 Pension Funds Report: DB still has some spark

Declining energy prices in particular inflicted a lot of pain on the Canadian economy, causing the country to slip into a technical recession in 2015.

As a result of the low interest rates, HOOPP has lowered its discount rate this year from 5.8% to 5.6%, Keohane said.

The pension fund’s investment income also dipped to $3.1 billion in 2015 from $9.1 billion in 2014.

Read: Sounding Board: Funded status tells the DB story

Despite the lower investment income and returns, the multi-employer plan saw its net assets grow to $63.9 billion in 2015 from $60.8 billion in 2014.

Also, HOOPP’s funded position improved last year. It stood at 122%, compared to 115% in 2014. As a result, contribution levels for employers and members have remained unchanged. “We still have one of the lowest contribution rates [among] the major plans,” Keohane said.

HOOPP, which covers Ontario’s hospital and community-based healthcare sector, has about 470 participating employers and 295,000 members.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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Chas:

HOOPP has historically been a standard setter in the areas of cost/performance, applied governance and dynamic asset management. They can be forgiven one poor year in a string of successful ones.

Volatility had less to do with it though, than return trend lines in the classes that it holds.

I can understand why volatility would be used as a catch-all to explain away poor performance in other pubs. I am starting to wonder, however, if BC, a pension publication, understands what the measure actually means and how it is calculated.

Thursday, March 03 at 1:06 pm | Reply

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