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Blake Hutcheson, OMERS CEO.Fernando Morales

The Ontario Municipal Employees Retirement System, or OMERS, said it posted a loss of 0.4 per cent, or about $500-million, in the first six months of 2022 despite the turmoil in stock and bond markets.

Royal Bank of Canada’s RBC I&TS All Plan Universe saw defined benefit pension plan assets – as measured by a typical mix of publicly held stocks and bonds – shrink 14.7 per cent over that period.

Blake Hutcheson, OMERS chief executive, said in an interview that the pension has been moving away from public equities over time to buy more private assets. In rapidly rising markets, pension funds with significant private assets can trail the broader stock indexes. On the downside, however, the pension funds can outperform. “Our strategy has played into our hand in terms of preserving and protecting our portfolio,” Mr. Hutcheson said.

OMERS is the third of three major Canadian pension plans with Dec. 31 fiscal years to report half-year returns in 2022. On Monday, Ontario Teachers’ Pension Plan reported a 1.2-per-cent return for the six months ended June 30. Wednesday, Caisse de dépôt et placement du Québec posted a 7.9-per-cent loss.

OMERS, like the other members of the “Maple Eight” large Canadian pension plans, owns more than stocks and bonds; it has moved into infrastructure, real estate and other private assets.

The funds’ varying returns for the first half of 2022 were driven by differences in their portfolios.

The Caisse had 75 per cent of its assets in equities and fixed income at June 30. By contrast, OMERS had about half of its portfolio in public equities, bonds and credit investments at June 30. Teachers had a little less than half of its assets in equities and fixed income, with roughly 20 per cent of its portfolio in what it calls “inflation sensitive” assets, designed to perform better in inflationary environments.

Jonathan Simmons, OMERS chief financial and strategy officer, said the allocation to private investments, coupled with decisions to favour quality over growth stocks, and short-term credit over long-term bonds, protected OMERS “from the worst six-month period of market losses incurred by investors in more than 50 years.”

OMERS said its public equities – stocks traded on exchanges – lost 13.2 per cent, but the private-equity division returned 7.7 per cent. Together, the two make up about 40 per cent of the OMERS portfolio as of June 30.

Mr. Simmons said in an interview that OMERS is seeing about 10-per-cent year-over-year growth in earnings at the companies in its private-equity portfolio, even before they’ve added to profits by acquiring new businesses.

Infrastructure returned 4.8 per cent, while real estate returned 9.9 per cent. Those two asset classes make up about one-third of the portfolio.

Mr. Hutcheson said in the interview that OMERS’ real-estate arm, Oxford Properties, has been moving away from retail real estate, taking it down to about 10 per cent of the portfolio, and has shifted toward buying industrial, life sciences and multifamily residential properties.

Bonds and credit investments – together, about a quarter of OMERS’s assets – lost 2.5 per cent and 1.8 per cent, respectively.

OMERS reported $119.5-billion in assets at June 30. The 10-year, annualized return through June 30 was 7.5 per cent.

OMERS has more than half a million members, municipal employees from communities across Ontario.

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