The investment portfolio of the C$201.4 billion ($151.4 billion) Ontario Teachers’ Pension Plan rose 6.3% for the first half of the year, increasing its total market value by C$10.3 billion.
“In the first half of the year, we had positive performance across every asset class in our portfolio, led by fixed income,” Ontario Teachers’ CIO Ziad Hindo said in a statement. “Over the last few years, we have been transitioning the asset mix to a more balanced approach from a risk perspective, and as part of this transition, we increased our allocation to the fixed-income asset class.”
As of June 30, the plan’s total investment in fixed income was C$92.8 billion, up from $77.7 billion as of Dec. 31.
“The role of fixed income is simple—it’s to provide us with diversifying returns in times when the global economy slows and we run into a recession,” Hindo said in a media briefing to discuss the mid-year results, “and I think it’s safe to say that over the last year or two we have seen a slowdown in the global economy.”
As of the end of 2018, the last date for which the pension provides full-year figures, the pension had an annualized total fund net return of 9.7% since inception. The five- and 10-year net returns, as of the end of 2018, were 8.0% and 10.1%, respectively, which surpassed their benchmark returns of 6.5% and 8.1%, respectively.
The plan invests in 35 global currencies and in more than 50 countries, and currency had a negative 1.3% impact on the total fund, resulting in a loss of C$2.5 billion. The loss was mainly attributed to the appreciation of the Canadian dollar relative to various global currencies including the US dollar, the euro, and the British pound.
Based on the plan’s statement of investment policies and procedures, the portfolio allows an asset mix that includes equities to be in a range of 30% to 40%; fixed income to be in a range of 23% to 77%; real assets in a range of 18% to 29%; inflation-sensitive investments of between 11% and 21%; credit of between 3% and 13%; and absolute return strategies of 4% to 14%.
“Our focus is on achieving stable results that help deliver financial security to our members through a variety of market conditions,” said Ontario Teachers’ CEO Ron Mock in a statement. “Our balanced portfolio approach is delivering strong returns that are in line with our long-term objectives.”
In July, the plan named Jo Taylor to be its new CEO and president effective Jan. 1, as Mock announced he would retire at year’s end. Taylor joined Ontario Teachers’ in 2012, and was appointed to his current role of executive managing director, global development, in August 2018.
The Ontario Teachers’ defined-benefit plan invests and administers the pensions of the province of Ontario’s 327,000 active and retired teachers.
Related Stories:Ontario Teachers’ Next Key Markets: Asia, Europe, and Infrastructure
Ontario Teachers’ Pension Releases Inaugural Climate Report
Ontario Teachers’ Pension Plan CEO to Retire