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OMERS president and CEO Michael Nobrega (Darren Calabrese For The Globe and Mail)
OMERS president and CEO Michael Nobrega (Darren Calabrese For The Globe and Mail)

OMERS boosts return, funding deficit swells Add to ...

The Ontario Municipal Employees Retirement System has posted a 12.01-per-cent rate of return for 2010, up from 10.6 per cent in 2009. But its funding deficit has tripled to $4.5-billion as its pension benefit obligations have increased.

OMERS released a summary of its financial results Monday, with detailed information to follow later this month. The fund, which provides pension services to more than 400,000 people, is grappling with a shortfall in the wake of the recession.

Temporary contribution increases and benefit reductions are part of the strategy to return it to balance. It requires a 6.5-per-cent annual return to bring itself back into a surplus position in 2025.

"Based on our asset mix policy and active investment strategy, we believe we can generate average returns of 7 per cent to 11 per cent annually over the next five years," said chief financial officer Patrick Crowley. "Doing so would return the plan to surplus between 2015 and 2020 - five to 10 years ahead of schedule."

OMERS' net assets rose to $53.3-billion last year, up from $47.8-billion the prior year. Its 12.01-per-cent return compares to a benchmark portfolio return of 11.47 per cent. RBC Dexia Investor Services Ltd. has estimated an 11.25-per-cent median return for large pension funds in 2010. Earlier this month, the Caisse de dépôt et placement du Québec posted a 13.6-per-cent return for the year.

OMERS is in the midst of working to shift its portfolio away from stocks and bonds towards private market investments, such as private equity, infrastructure and real estate. Its private equity portfolio delivered returns of 22.21 per cent last year (the benchmark return was 28.05 per cent). Infrastructure returned 10.10 per cent, compared to a benchmark of 8.5 per cent, while Oxford Properties returned 7.51 per cent, compared to a benchmark of 6.65 per cent.

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