Following a 10.88% rate of return, the Healthcare of Ontario Pension Plan (HOOPP) increased its assets by more than C$7 billion, retaining its 122% funded status at the end of 2017.
“Our investment return for 2017 was 10.88%. While we had strong returns pretty much across all asset classes, our public and private equities, fixed income, and real estate all provided significant contributions to our investment income,” HOOPP President and CEO Jim Keohane said in a statement.
At the end of 2017, the Canadian pension fund’s assets climbed from 2016’s C$70.4 billion to C$77.8 billion ($62 billion), keeping its funded status on-par with the previous two years.
Investment income was C$7.6 billion ($5.9 billion, beating 2016 by C$1 billion, with the fund’s 10.88% return exceeding HOOPP’s benchmark by 2.99%. According to a news release, the 10-year return is at 9.55%, just above the 20-year return of 9.01%.
HOOPP utilizes a liability-driven approach to its investment strategy. With two portfolios—a liability hedge portfolio and a return-seeking portfolio—the fund is able to continually reap returns while minimizing risk. The liability hedge portfolio consists of real estate and fixed income, while the return-seeking portfolio handles public equities, private equity, corporate credit, short-term money market and foreign exchange, and other return-seeking strategies.
In 2017, 48% of the liability hedge portfolio contributed to HOOPP’s returns. Although real return bonds were basically unchanged, nominal bonds returned 10.5%. According to the release, the real estate section of the portfolio saw an 11.9% currency hedged return—a major contributor during the year.
Returning the remaining 52% of HOOPP’s income, the return-seeking portfolio saw public equities as the top contributor with a 14.8%. Private equity returned 19% on a currency hedged basis.
“HOOPP exists to pay pensions for members. We invest with that objective in mind to ensure that we can meet our pension obligation regardless of the economic backdrop. We also continue to reinvest in our personnel and our systems in order to maintain the sustainability of the Fund and support growth going forward,” Keohane said.
Tags: HOOPP, Jim Keohane, Liability Hedge Portfolio, Pension