Ontario Teachers’ Pension Fund Posts 11% Return in 2011

Ontario Teachers’ Pension Plan, Canada’s third-biggest retirement-fund manager, posted an 11 percent return on investments in 2011, led by fixed income, private capital and infrastructure assets.

Net investment income rose to C$11.7 billion ($11.8 billion) last year from C$13.3 billion in 2010, the Toronto-based pension said in a statement today. The fund managed C$117.1 billion in assets as of Dec. 31, compared with C$107.5 billion a year earlier.

“Performance was especially impressive given the market volatility and economic uncertainty that accompanied the Eurozone debt situation, and was compounded by last year’s natural disasters,” Chief Executive Officer Jim Leech said in the statement.

Ontario Teachers’ results beat the 0.5 percent return of Canadian pension funds last year, as estimated in a Jan. 23 report by RBC Dexia Investor Services Ltd.

Canada’s biggest pension-fund manager, Caisse de Depot et Placement du Quebec, on Feb. 23 reported an annual return on investments of 4 percent. Ontario Municipal Employees Retirement System, a Toronto-based pension fund manager, said Feb. 24 it had a 3.2 percent return last year.

Ontario Teachers’ said equities had a loss of 0.8 percent last year, driven down by Canadian equities, compared with a return of 10 percent in 2010. Canada’s benchmark S&P/TSX Composite Index fell 11 percent last year.

Fixed Income Returns

Fixed income returned 20 percent in 2011, double the rate from the year earlier. Real assets such as real estate, infrastructure and timberland returned 13 percent, down from 14 percent in 2010. Commodities lost 2.3 percent, compared with a 3.2 percent return the prior year.

“Real estate performed extremely well this year, private capital and fixed income did very well,” Neil Petroff, chief investment officer, said in a press conference. “Where we had large dollars we did well.”

Private-equity investments returned 17 percent in 2011, the pension fund said. Teachers’ Private Capital managed C$12.2 billion in assets at the end of the year, up from C$12 billion a year earlier.

Ontario Teachers’ estimated funding shortfall narrowed to C$9.6 billion, from C$17.2 billion a year earlier.

Economic Uncertainty

“The deficit was really caused by the uncertainty of the economy and interest rates, and demographics,” Leech said in a press conference. “We still have a legacy of the 2008 loss that haunts us.”

Ontario Teachers’ needs “a small course correction” to ensure the plan is solid and sustainable, Leech said, adding that a committee has been created to investigate how. “This isn’t crisis time, this is sitting down and being smart about what are the changes we can make now.”

The pension fund manager’s stock and private-equity holdings rose to C$51.7 billion at the end of 2011 from C$47.5 billion, the fund said. Fixed-income assets climbed to C$55.8 billion from C$45.9 billion a year earlier.

The fund’s commodities investments totaled C$5.7 billion at year-end, up from C$5.2 billion. Real assets, which includes real estate, infrastructure and timberland, fell to C$25.8 billion at the end of 2011 from C$26.2 billion in 2010.

Ontario Teachers’ is responsible for investing and managing pensions for about 300,000 active and retired teachers in Canada’s most populous province.

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