Ontario Teachers’ Pension Plan, the largest pension in Canada’s most populous province, returned 11 percent in 2013 as stocks rallied and real estate investments rose.
The pension manager reached a record C$140.8 billion ($127 billion) in assets for the year, according to a statement today. Investment income was C$13.7 billion, down from C$14.7 billion in 2012.
“It’s a great result but it doesn’t mean the risks are gone,” Chief Executive Officer Ron Mock, who succeeded Jim Leech on Jan. 1, told reporters today. “We’re going to be managing through volatility on a go-forward basis. We cannot be complacent in managing assets.”
Ontario Teachers’ missed the 14 percent median return for Canadian pension funds last year, according to Royal Bank of Canada’s RBC Investor & Treasury Services unit. Like other Canadian pensions, the fund is struggling to meet liabilities of an aging population. The pension said 126 of its members are older than 100.
“The next decade will not be like the last one,” Mock said at the fund’s headquarters in Toronto. “’Pension plan’ and ‘competition’ in the same sentence sounds like a bit of an oxymoron but with large pools of capital all looking for investment opportunities globally now, the next decade will be marked by competition.”
The fund was the first Canadian pension manager to invest in hedge funds in 1996 and the first to have an active real estate unit. Over the next decade, the fund will focus on discovering new industries and investments, hiring and training new employees to drive quick deals, and on expanding abroad, Mock said. It opened a Hong Kong office last year and is deciding on its next international location.
Ontario Teachers’ will be maintaining its asset mix in the near term, Mock said. The fund decreased its equities allocation to 45 percent of its total portfolio and increased its real estate holdings to 14 percent. Meanwhile, the fund dropped fixed-income exposure to 41 percent from 48 percent in 2012.
The Toronto-based fund’s equities portfolio gained the most last year, returning 28 percent as stocks gained, with the Standard & Poor’s 500 Index surging 30 percent. The pension’s private capital unit returned 27 percent and infrastructure assets gained 17 percent. Cadillac Fairview, Ontario Teachers’ real estate arm, rose 13 percent.
Bonds lagged, with the fixed-income portfolio declining 7.9 percent. Ontario Teachers’ will continue seeking longer-duration bonds to closely match the liabilities of their 307,000 working and retired members, Chief Investment Officer Neil Petroff said.