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Report On Business OMERS posts 6.7-per-cent return, bolstered by infrastructure, real estate assets

OMERS CEO Michael Latimer is seen in this file photo.

Donald Weber/The Globe and Mail

The pension plan for Ontario municipal employees earned a 6.7-per-cent return in 2015 as private market investments made gains.

The Ontario Municipal Employees Retirement System (OMERS) said Friday that its private equity, infrastructure and real estate investments performed especially well during 2015, cushioning the plan from volatility in the public markets.

Low interest rates and slower global growth contributed to a 0.7-per-cent return for public investments in 2015, down from 11 per cent a year earlier. Meanwhile, private investments showed solid performance with a 14.5-per-cent return in 2015, up from 9.1 per cent.

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These results demonstrate "the importance of diversification, and investing in high-quality assets," said Michael Latimer, chief executive of OMERS, in a statement. Net assets grew by $5-billion to more than $77-billion in 2015.

OMERS, which manages assets and administers pensions for 461,000 Ontario employees and retirees, continued to reduce its funding shortfall in 2015. The pension plan is now 91.5 per cent funded as a result of investment returns and member and employer contributions, compared with 90.8 per cent the year before. In 2010, OMERS said it planned to eliminate the deficit by 2025.

One year ago, OMERS said it would increase its exposure to infrastructure investments with stable cash flows in countries such as Canada and the U.S., as well as Australia. Over the course of last year the pension plan's asset mix has tilted toward private investments, and infrastructure now makes up 16.4 per cent of the portfolio, up from 14.7 per cent a year before.

OMERS said its infrastructure holdings posted gains of 17.3 per cent, real estate earned 15.3 per cent and private equity investments earned 10 per cent in 2015.

Some of the pension plan's largest deals of 2015 included infrastructure arm Borealis Infrastructure's acquisition of Fortum Distribution AB, a large electricity distribution network in Sweden, along with a consortium. The deal was valued at about $7-billion (U.S.), according to data from Thomson Reuters.

OMERS also joined other pension funds on deals, including the $2.8-billion acquisition of toll road leading into downtown Chicago alongside Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan.

Mr. Latimer has also previously expressed plans to reduce the portfolio's public market weighting to about 53 per cent. One year ago, it stood at 58 per cent, but this year public market investments such as stocks and bonds represented just 52 per cent of assets.

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In 2015, OMERS received $3.8-billion (Canadian) in contributions from plan members and employers, and paid out $3.4-billion in benefits to the 141,000 people that receive an OMERS pension each month. About 18,000 people joined the plan as new members last year.

Editor's note: An earlier online version of this article indicated public investment returns had gone up from 11 per cent in 2014. In fact, they have fallen.

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