Ontario Teachers’ Pension Plan, Canada’s third-biggest retirement-fund manager, posted a 13 percent return on investments in 2012, led by real estate, private equity and stocks.
Net investment income rose to C$14.7 billion ($14.5 billion) from C$11.7 billion in 2011, the Toronto-based pension-fund manager said today in a statement. The fund managed C$129.5 billion in assets as of Dec. 31, up from C$117.1 billion a year earlier.
“The investment team successfully navigated significant risks and turmoil in the global economy again in 2012 to earn an excellent rate of return,” Chief Executive Officer Jim Leech, 65, said in the statement. “This was an outstanding achievement during a challenging year.”
Ontario Teachers’ beat the 9.4 percent median return of Canadian pension funds in 2012, based on a Jan. 29 report by Royal Bank of Canada’s RBC Investor Services unit. In comparison, Caisse de Depot et Placement du Quebec, Canada’s largest pension-fund manager, returned 9.6 percent, Ontario Municipal Employees Retirement System gained 10 percent, and Healthcare of Ontario Pension Plan rose 17 percent.
Teachers’ is responsible for investing and managing pensions for about 303,000 active and retired teachers in Canada’s most populous province.
Teachers’ said public and private-equity investments, which comprised C$59.5 billion of the fund’s assets, returned 14 percent last year, led by a 19 percent return from private equity and an almost 17 percent gain from non-Canadian equities. Teachers’ Private Capital managed C$12 billion of assets at the end of the year.
Fixed-income investments, which accounted for C$60 billion of assets, returned 5.1 percent, while commodities, representing C$7 billion of the fund’s portfolio, lost 1.9 percent last year.
Real assets such as property, infrastructure and timberland, which made up C$28.7 billion of assets, returned 15 percent. The fund’s real-estate portfolio, with C$16.9 billion of assets, returned 19 percent for the year, its best performance ever for that asset class.
Teachers’ estimated funding shortfall shrank to C$5.1 billion from C$9.6 billion a year earlier, after changes to inflation-protection guarantees for plan members were announced in February.
Teachers’ seeks to expand emerging-markets investments to as much as 20 percent of the fund’s assets over time from 15 percent today “as opportunities present themselves,” Neil Petroff, chief investment officer, said in a press briefing.
Teachers’ biggest emerging-markets exposure is to Brazil, though Petroff said the fund significantly reduced holdings in resource companies controlled by billionaire Eike Batista including MMX Mineracao e Metalicos SA.
“We’ve earned a lot of money with Eike Batista, we’ve kept a lot money that we’ve earned,” Petroff said. “We still have exposure to him and we believe over the long term some of these assets are going to generate lots of income.”
Leech said during today’s press briefing that he’ll retire by the end of this year, and that the pension fund’s board has been looking “externally and internally” for a successor.
Leech has been CEO since December 2007, when the private-equity head was promoted internally to succeed Claude Lamoureux on his retirement. Leech joined Teachers’ in 2001. Teachers’ paid Leech C$5.41 million in total compensation excluding pension last year, up 24 percent from 2011.