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Healthcare of Ontario Pension Plan CEO Jeff Wendling says 'we’re at the point now where we’re looking at relatively high inflation for some period of time and concerns about global growth.'Handout

The Healthcare of Ontario Pension Plan (HOOPP) recorded an 11.28-per-cent return on investments for 2021.

While the mark is slightly below its 2020 return and trails other major Canadian pension plans’ 2021 numbers, it is one of the best in HOOPP’s history relative to the benchmark investment portfolio it compares itself with, chief executive officer Jeff Wendling said in an interview with The Globe and Mail.

The 60-year-old plan, which serves 420,000 Ontario health care workers at 620 employers, closed the year with $114.2-billion in assets and said its funding ratio – which compares its assets with the future benefits it owes members – was 120 per cent at year-end.

HOOPP’s 11.28-per-cent return in 2021 topped its 8.59-per-cent benchmark – what a similar portfolio should have been expected to return. The pension said its 10-year return was 11.06 per cent, whereas the benchmark for that period was 8.67 per cent.

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Like many other large Canadian pensions, HOOPP had a banner year in private equity, which typically uses debt to fund investments in companies that do not trade on public stock markets. HOOPP’s private-equity portfolio returned 23.7 per cent in 2021.

HOOPP’s portfolio of publicly traded stocks – $57.3-billion – returned 20.1 per cent. Its real estate portfolio, $17.9-billion at year-end, returned 12.5 per cent. The $2.7-billion infrastructure portfolio, launched in 2019, returned 14.2 per cent.

Its $100-billion fixed-income category, which includes bonds, fell 1.9 per cent. Rising interest rates mean declining bond prices. (HOOPP’s individual asset classes add up to $216-billion, but under pension accounting, they’re offset by more than $100-billion in derivatives and other liabilities, for a net $114.2-billion in assets.)

HOOPP does not report benchmarks by asset class. Mr. Wendling said, however, that every asset class outperformed its benchmark in 2021.

The year continued a strategy shift under Mr. Wendling that began when he took over from Jim Keohane in April, 2020, as the seriousness of the pandemic was becoming clear.

The plan historically has been focused on North America and Western Europe but has slowly added more emerging-market exposure. It has also been building up its programs for investing in infrastructure and real estate as it reduces its exposure to bonds.

That has helped in an inflationary environment exacerbated by the Russian invasion of Ukraine, Mr. Wendling said. (HOOPP had about $150-million of derivatives linked to emerging-market stock indexes; once the indexes removed their Russian constituents last week, HOOPP’s Russia exposure vanished.)

“We’re at the point now where we’re looking at relatively high inflation for some period of time and concerns about global growth,” he said. “I think we’ve got a well-diversified portfolio to ride out the difficulty … and if we did see sizable sell-offs and assets as we saw in the financial crisis, we would look to be buyers.”

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HOOPP also said Wednesday it would join several other major Canadian pensions in committing to achieving net-zero carbon emissions in its portfolio by 2050. Mr. Wendling said HOOPP is still developing interim targets for carbon reductions.

HOOPP’s 2021 returns are in line or behind the other members of the “Maple Eight” big Canadian plans with a calendar-year fiscal period.

Ontario Teachers’ Pension Plan, with $221-billion in assets, reported an 11.1-per-cent return for 2021. Caisse de dépôt et placement du Québec, with $419.8-billion in assets, posted a 13.5-per-cent return. And the Ontario Municipal Employees Retirement System, with $121-billion in assets, has reported the highest return – 15.7 per cent.

Editor’s note: The figure for the Ontario Municipal Employees Retirement System's assets has been corrected in the online version of this story.

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