The OPSEU Pension Trust (OPTrust) has reported gross investment results of 10.1 per cent for 2012, surpassing both its funding target return of 6.5 per cent and its composite benchmark.
Since its inception in 1995, the plan has achieved an average annual rate of return of 8.6 per cent. These results have helped OPTrust maintain its position as a fully-funded pension plan.
The plan’s net assets increased to USD14.7bn at year-end (USD13.7bn as at 31 December 2011) after paying over USD745m in pension benefits in 2012.
“The ongoing commitment to the plan by its sponsors, board of trustees, employees and membership was key to the success of our program in 2012,” says Bill Hatanaka (pictured), president and chief executive of OPTrust. “Our investment results and fully-funded status demonstrate that, with strong sponsorship and prudent management, defined benefit is a highly effective model that can help people achieve economic security in retirement.”
OPTrust’s long-term diversification strategy, along with strong double-digit returns in its real estate, infrastructure and private equity portfolios were major contributors to its results.
The infrastructure portfolio led performance in 2012, with a return of 23.7 per cent. The plan’s other alternative asset classes, private equity and real estate, had similarly good results, returning 20.5 per cent and 17.9 per cent respectively. The plan also benefitted from the sharp recovery of global equity markets in the second half of the year, with its global equities portfolio posting a 17.8 per cent return. Canadian equities generated a return of 9.1 per cent.
Positive returns of 3.4 per cent and 3.0 per cent were generated from the fixed income and real return bond portfolios, respectively. The energy commodities portfolio posted a loss of 3.8 per cent.
The plan’s 2012 funding valuation shows that the plan remained fully-funded as of 31 December 2012 with a surplus of USD34m after accounting for the plan’s USD852m rate stabilisation reserves.
The valuation also identified USD528m in deferred investment gains, compared to USD189m at the end of 2011. These gains will be recognised between 2013 and 2016, further improving the plan’s funded status.