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Retiring CEO Jim Keohane, seen here, won’t disclose, exactly, how the plan has done so far in 2020. But he says that the plan’s bond-heavy portfolio, coupled with its significant hedging activities, will likely give it better results than the average Canadian pension plan.Kevin Van Paassen/The Globe and Mail

The Healthcare of Ontario Pension Plan posted a 17.1 per cent return in 2019, pushing it close to $100-billion in assets and keeping the primary pension for Ontario health-care workers with significantly more assets than needed to pay its future benefits.

That, however, already seems so long ago, as the combination of declining interest rates and horrific stock returns has badly dented defined-benefit pension plans across the world. Retiring CEO Jim Keohane won’t disclose, exactly, how the plan has done so far in 2020. But he says that the plan’s bond-heavy portfolio, coupled with its significant hedging activities, will likely give it better results than the average Canadian pension plan.

“We have a much lower exposure to public equities than most funds," Mr. Keohane said in an interview Monday. “And what that does is, in up years we’re likely going to do less well than other funds, but in down years we’re going to do a lot better, so we’re not going to lose anywhere near the amount of money that other funds will lose because we just don’t have the same exposure to public equities.”

That was what happened in the financial crisis a decade ago, and “I expect you’ll see the same thing this year,” he said.

“It would appear that the market is pricing in a very severe downturn, for about a two-year period," Mr. Keohane said. “If that doesn’t play out, this could prove to be opportunity.” He wouldn’t acknowledge any major reallocation in HOOPP’s portfolio, though, saying merely “we’re always rebalancing.”

HOOPP provides retirement income for 350,000 provincial health-care workers at more than 570 employers. The plan had $94-billion in assets at the end of 2019, up from $79-billion a year before and double the amount in 2012 when Mr. Keohane assumed the CEO role. Its funding – the ratio of assets to the estimated cost of paying future benefits – was 119 per cent at the close of the year.

HOOPP’s 17.1-per-cent return last year topped its benchmark – a market return of comparable assets, used to evaluate investment performance – of 15.1 per cent. HOOPP does not release benchmark data for individual investment departments.

Over 10 years, HOOPP’s annual return averaged 11.4 per cent, compared with 8.9 per cent for its benchmark. The 20-year return was 8.6 per cent, versus the benchmark’s 6.8 per cent.

Public equities make up about 27 per cent of the HOOPP portfolio. Its Canadian, U.S. and international stock portfolios each returned between 20 per cent and 30 per cent in 2019, versus negative returns in 2018.

In 2019, the hedging program – designed to gain when markets fall – lost $158-million. That compared with a gain of $285-million in 2018.

HOOPP’s real estate portfolio returned 8.4 per cent in 2019, aided by a mix of assets that was lighter on retail than many plans.

“We’re heavily weighted in industrial, large-scale warehouses," Mr. Keohane said. "As people have changed preferences from shopping in person to shopping online, [the] fulfilment centres for online shopping are these large industrial warehouses that we own a lot of, so that sector has performed extremely well.”

Mr. Keohane retires this month after two decades at HOOPP. Jeff Wendling, the organization’s chief investment officer and executive vice-president, succeeds him April 1. Mr. Wendling joined HOOPP in 1998.

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