The Ontario Municipal Employees Retirement System has posted a 10-per-cent return for 2012, slightly above its benchmark, with private equity and real estate investments more than making up for losses in the oil and gas sector.
But, as with many pension funds, OMERS is still feeling the impact of the investment losses it racked up when the financial crisis hit. The estimate of all of the payments that its members will be entitled to is $10-billion higher than the actuarial measure of OMERS' net assets.
"This deficit is based on a long-term projection going out several decades and in no way reflects our ability to pay pensions in the short term," OMERS chief financial officer Patrick Crowley stated in a press release.
"Solid investment returns which have averaged 8.9 per cent per year in the four years since the financial crisis, and 8.24 per cent over the past 10 years, combined with contribution increases, are already having a positive impact on reducing the deficit," he added. "Sustained returns at this level could bring the plan back to fully funded status earlier than anticipated."
The fund collected $3.2-billion in contributions during 2012 and paid out $2.7-billion in benefits. Its net assets rose by $5.7-billion to $60.8-billion.
Its capital markets arm, which manages its publicly-traded investments such as stocks and bonds, posted a return of 7.5 per cent.
Its private market portfolio posted a 13.8 per cent return. Within that portfolio private equity investments returned 19.2 per cent, real estate (managed by its real estate business Oxford Properties) 16.9 per cent, and infrastructure 12.7 per cent. But its "strategic investments," which are largely in the oil and gas sector, posted a return of negative 10.1 per cent because of falling oil and gas prices in 2012.
During a press conference OMERS CEO Michael Nobrega said the pension fund is now seeing a flood of opportunities to acquire oil and gas properties in Saskatchewan and Alberta, with junior oil and gas firms unable to finance.
"We've had more opportunities in the last two weeks than we've had in three years," he said.
OMERS is in the midst of rebalancing its portfolio away from stocks and bonds towards more private market investments. Its goal is to ultimately have about 53 per cent of its assets in the public markets, and 47 per cent private. At the end of the year it had 60 per cent in public markets and 40 per cent in private, compared to 82 and 18 per cent, respectively, nine years ago.
About 88 per cent of the fund is now managed by OMERS employees, as opposed to external fund managers, up from 74 per cent five years ago, and OMERS is trying to take that figure to 95 per cent.