HOOPP bucks trend, posts surplus

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The Healthcare of Ontario Pension Plan has reported a surplus in its fund at the end of 2010, making it a rare large pension plan that is not grappling with a deficit.

The HOOPP plan, which serves over 250,000 people in Ontario's health care sector, earned a 13.7-per-cent return on its investments last year, boosting its assets to $35.7-billion from $31.1-billion in 2009.

The pension plan reported it was 101 per cent funded at the end of last year, which means its assets exceeded its estimated costs to fund its pension liabilities. The funding is a slight decline from 102 per cent at the end of 2009, but still leaves HOOPP with an estimated $200-million in excess funds, the plan said in its annual report released Monday.

The results stand in contrast to returns reported last week by the Ontario Teachers Pension Plan, which said it has a $17.2-billion funding shortfall despite earning a 14.3 per cent rate of return last year on investments. Teachers has assets of $107.5-billion.

Teachers is grappling with a slew of particularly challenging demographic factors boosting its pension costs, including an older retiree base populated by people with particularly healthy habits and longer-than-average lifespans.

But it is also facing financial issues that have not been as severe for HOOPP. While Teachers lost $19-billion when markets crashed in 2008, for example, HOOPP lost significantly less that year because of a well-timed decision to reduce its equity holdings in 2007 because of a long-term need to boost cash flow to pay benefits.

The health care fund also says it has benefited by a strategic decision to embrace "liability driven investing" which means it seeks to have assets linked to liabilities to reduce volatility. This typically means funds invest in holdings such as inflation-linked bonds and derivative instruments to ensure assets are aligned with inflation and interest-rate risks.

HOOPP chief executive officer John Crocker said the plan's contribution rates for members and employers have not changed since 2004 and will remain in place at least until the end of 2012, "providing peace of mind" for members.

Mr. Crocker said equities and long-term bonds were the strongest performers in 2010. The fund held 45 per cent of its assets in equity-related holdings at the end of 2010, and 55 per cent in fixed income.

HOOPP earned a return of 17.4 per cent last year on its Canadian equities and 16.8 per cent on U.S. equities, but lost 2.5 per cent on its global equity portfolio after currency conversion. Its real estate assets climbed by 12.3 per cent, while private equity and "special situations" holdings earned a return of 9.7 per cent.

Canadian long-term bonds earned 17.4 per cent while real-return bonds climbed 11.4 per cent and Canadian universe bonds were up 9.5 per cent.