Despite shifting its portfolio from public to private markets, the administrator of Ontario’s Public Service Pension Plan saw a 10.8% return on investments in 2017 while also maintaining its 97% funded status.
After its first year, in which the Ontario Pension Board’s (OPB) investments were managed by the government-created Investment Management Corp. of Ontario (IMCO), the fund realized net investment income of C$2.5 billion ($2 billion), growing its net assets to C$26.4 billion ($20.4 billion) at year’s end.
The 10.8% return was 40 basis points above its custom benchmark.
The fund also increased longevity expectations and lowered expectations for future investment returns, adding to the cost of benefits.
“I am very pleased with our strong performance and investment return in 2017—the first partial year our portfolio has been managed by the Investment Management Corporation of Ontario,” Mark Fuller, president and CEO of OPB, said in a statement. “We believe that pooling our assets under IMCO’s management will help us earn higher returns going forward than we could on our own and improve our direct access to a wider range of high-quality investment opportunities.”
The fund increased its gross exposure by C$1.8 billion ($1.39 billion), continuing to shift assets from public to private markets over the previous year. The measure included adding 15.8% to its infrastructure portfolio, 53.5% to private equity, and 18.1% to real estate.
According to a news release, the fund’s public market portfolio returned 13.3% for the year, while private markets returned 4.5%. OPB’s public market investments include public market equity, fixed income, and cash; while real estate, private equity, and infrastructure make up its private market investments.
The OPB’s full 2017 annual report will be posted on its website once the president of the Treasury Board tables it with the Legislative Assembly.