The Ontario Municipal Employees Retirement System (OMERS) said it recorded a 15.7-per-cent return in 2021, easily topping its benchmark target of 6.6 per cent.
The return, after expenses, produced $16.4-billion of net investment income and pushed OMERS’s assets to $121-billion at Dec. 31.
OMERS’s 10-year average net return is 8 per cent, and the plan’s funded status has risen to 97 per cent today from 86 per cent in 2012, the plan said Monday. Funding status compares a plan’s assets with its liabilities – the estimate of future benefits to be paid to members.
“We were very focused, after a difficult first half of 2020, on getting behind the right strategies, the right people, not getting distracted and just seeing through this period,” OMERS chief executive officer Blake Hutcheson said in an interview Monday. However, he said, “We don’t ever measure our returns on one year, not a difficult one or a terrific one.”
The 2021 numbers contrast with a 2.7-per-cent loss OMERS posted a year earlier, which was below both its 2020 benchmark return of 6.9 per cent and the results of other large Canadian public pension plans. Caisse de dépôt et placement du Québec, Ontario Teachers’ Pension Plan and Healthcare of Ontario Pension Plan posted returns in calendar 2020 ranging from 7.7 per cent to 11.4 per cent, while Alberta Investment Management Corp. (AIMCO) returned 2.5 per cent. (Other major plans report on a different fiscal year.)
In 2020, OMERS marked down the value of real estate and private equity holdings particularly affected by the COVID-19 pandemic. OMERS’s real estate investments posted an 11.4-per-cent loss in 2020, while the value of its private equity holdings declined by 8.4 per cent.
OMERS said its 2020 performance also suffered from being heavily invested in dividend-paying oil and gas and financial-services stocks and underweight in technology.
In 2021, by contrast, Mr. Hutcheson said the pension plan exceeded its benchmarks across all segments of its portfolio. Assessing stock valuations, OMERS did not shift away from oil and gas into public technology stocks in 2021, Mr. Hutcheson said. Public equities – stocks traded on major exchanges – returned 20.7 per cent, reflecting a strong year in global markets. The public investments segment, which includes the public equities, bonds and cash, returned 14.6 per cent, versus its 5.8-per-cent benchmark.
Private equity returned 25.8 per cent, versus a benchmark of 8 per cent. OMERS said it recorded higher valuations across its portfolio as its businesses increased earnings both organically and through acquisitions.
Real estate assets posted a 15.9-per-cent return, versus a benchmark of 6.1 per cent. OMERS said its real estate business, Oxford Properties, increased its allocation to industrial real estate assets as demand grew for warehousing and logistics spaces from the strength of e-commerce during the pandemic. It also increased investments in life-sciences real estate as it moved away from retail real estate and office buildings.
OMERS’s infrastructure division earned 10.7 per cent in 2021, versus a benchmark of 7.9 per cent.
Mr. Hutcheson said Monday that while the OMERS results were good news, “It’s not a good news story globally and our thoughts and our prayers are with the people of Ukraine. ... We do not have any direct investments in either the Ukraine or Russia, and I can promise you that posture will not change in the foreseeable future.”
Mr. Hutcheson said OMERS has been “more or less a net seller for the first quarter of this year, keeping as much of our powder dry as possible.” OMERS estimates it has about $6-billion ready to invest. ”We’re armed with ample capital to see how things play out.”
While OMERS was able to report what Mr. Hutcheson called “exceptional returns,” it has not been able to quiet unions whose members are part of the OMERS plan. The unions have been criticizing OMERS’s costs and long-term financial performance, particularly after 2020.
The Canadian Union of Public Employees (CUPE) Ontario, which called for an independent review of OMERS last year, renewed that demand Friday in advance of the OMERS results and again Monday after their release. CUPE Ontario represents 125,000 of 289,000 OMERS plan members – just less than half of OMERS active membership.
And Mike Major, executive director of the City of Toronto Administrative, Professional, Supervisory Association Inc. (COTAPSA), a union of Toronto municipal employees, sent a letter to OMERS leadership last week with a series of questions about the pensions’ costs, investments and funding that he said he’d like to see answered as OMERS presents its 2021 results in stakeholder meetings.
In May 2021, George Cooke, the chair of the board of directors of OMERS Administration Corp., said a special outside review was “not warranted” and the board, particularly after 2020, “thoroughly reviews investment performance, independent of management, utilizing external experts where appropriate.”
Mr. Hutcheson reaffirmed that in Monday’s interview. ”Our board, our chair has been very clear that there will be no review ... that has been a consistent refrain.”
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