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Jim Keohane, president and CEO of the Healthcare of Ontario Pension Plan (HOOPP) is photographed in Toronto, Ont. Tuesday, June 26/2012.Kevin Van Paassen/The Globe and Mail

The Healthcare of Ontario Pension Plan posted a 17-per-cent return on its investments last year and is running a significant surplus, far outstripping most Canadian pension plans in its financial performance.

The $47-billion pension fund, which represents 274,000 Ontarians working in the healthcare sector, said it was 104 per cent funded at the end of 2012, which means it has assets significantly greater than required on a solvency basis. By comparison, the average Canadian pension plan was just 69 per cent funded at the end of 2012 after years of low interest rates and growing funding obligations, according to a report by consulting firm Aon Hewitt.

HOOPP chief executive officer Jim Keohane said HOOPP's 17.1-per-cent return on investments was its best result in more than a decade.

"This was a year when all of our investment strategies worked," he said. "We were firing on all cylinders, with positive returns from every type of investment."

Canadian pension plans earned an average of 9.4 per cent on their investments last year, according to a survey by RBC Investor Services Ltd. The giant Caisse de dépôt et placement du Québec, for example, earned 9.6 per cent on its investments last year, while the Ontario Municipal Employees Retirement System reported 10-per-cent returns and The Canada Pension Plan Investment Board, which has a March 31 year end instead of a Dec. 31 year end, reported nine-month returns of 5.5 per cent as of Dec. 31.

HOOPP attributes much of its funding success to its liability driven investment (LDI) strategy, which sees the pension fund closely match its assets with its liabilities to try to ensure the plan will remain well funded even when markets are highly volatile. To accomplish the goal, HOOPP invests heavily in bonds with long maturities to ensure their investments match the long-term nature of pension funding liabilities. It has reduced the proportion of stocks it holds, and seeks additional returns through complex derivatives strategies.

HOOPP says its 10-year average rate of return is now over 10 per cent, giving it one of the best long-term investment records for pension plans worldwide.

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