As a result of slow global growth, low interest rates and market volatility, the Ontario Municipal Employees Retirement System (OMERS) saw its net investment return slide to 6.7% in 2015, down from 10% in 2014.

While the pension plan’s 2015 net return for public investments was 0.7%, down from 11% in 2014, it saw the net return for its private investments — which include private equity, infrastructure and real estate — grow to 14.5%, up from 9.1% in 2014.

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Diversification is working for the fund, said Jonathan Simmons, chief financial officer at OMERS, during a presentation on Friday. “In a year where there were thin returns from fixed income … and poor returns from commodities, no one is surprised that our public investment returns were 0.7%, below the 11% return we enjoyed in the previous year,” he added.

“We had a solid return from our private equity group, held back a little bit by some of our exposure to a private equity asset we had in the Alberta oil and gas sector. But nonetheless, a respectable return for our private equity.”

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Simmons added that it was an exceptional year for infrastructure – posting a return of 17.3% compared to 10.6% in 2014 – with strong gains across almost all assets in the portfolio, but most noticeably in its U.K. assets associated with the ports.

For real estate – which the results showed had a return of 15.3%, up from 8.7% in 2014 – Simmons said the pension fund experienced good returns in Canada, better in the U.S. and very strong returns out of its European portfolio.

The investor’s net assets grew to $77 billion in 2015, compared to $72 billion the previous year, “and we’re growing,” added Simmons.

“Where our exposures to our private investments in all of our asset classes have continued to grow, we are putting money to work.”

For example, in 2015, OMERS entered the Swedish market, buying Fortum Distribution AB and the Germany market through the purchase of Autobahn Tank & Rast Holding. It bought a UK consulting firm called Environmental Resources Management, and became the second largest landlord in Boston with three new office properties. It also expanded in Canada, with the redevelopment of Toronto’s Yorkdale mall just one example.

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“We’re portfolio managers, not just aggregators,” said Simmons, “so while we have deployed $5.6 billion into the private markets, we’ve returned $5.5 billion to OMERS in terms of dividends, distributions and asset recycling.”

OMERS’ funded status climbed to 91.5% from 90.8% the year before as a result of investment returns as well as member and employer contributions.

“The good news is we exceeded our funding requirement,” said Simmons. “Our funding requirement for 2015 is 6.5%. That means we added $100 million of value above the funding requirement for the plan.”

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In 2015, the pension fund received $3.8 billion in contributions from plan members and employers. It paid out $3.4 billion in benefits.

Approximately 18,000 new members joined OMERS in 2015 — an increase in active plan membership of 1% over the prior year. Almost 141,000 people receive pensions from OMERS every month.

See OMERS’ 2014 results: OMERS assets top $70-billion mark

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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