Ontario Teachers’ Pension Plan reports lower rate of return in 2016

By Reuters

  • 30 Mar 2017

The Ontario Teachers' Pension Plan's rate of return dropped to 4.2 percent last year from 13 percent in 2015, the fund said on Wednesday, citing unfavorable currency movements.

The results still exceeded a benchmark target of 3.5 percent for the fund, Canada's third-biggest public pension plan.

The plan, which administers pensions for 316,000 working and retired teachers in Canada's most populous province, said its net assets grew to C$175.6 billion at the end of 2016 from C$171.4 billion a year earlier.

The fund, which has investments in more than 50 countries, said currency movements had a negative impact of 280 basis points on its rate of return in 2016, compared with an 830-basis-point positive effect in 2015.

Ontario Teachers' said it was 105 percent funded as of Jan. 1, meaning it had a surplus of assets with which to meet its future pension obligations. This was the fourth year it has posted a surplus after a decade of recording annual deficits.

Chief Executive Officer Ron Mock said the fund had achieved that despite major challenges in the global economy.

"Being focused on the long-term, we continue to believe having a highly diversified portfolio is the best way to pay pensions and minimize funding volatility over time," he said.

"Last year big swings in global currencies had an impact on the short-term value of Plan assets," he added.

Ontario Teachers' pioneered a move by Canadian pension funds in the 1990s to invest directly in private companies, infrastructure and real estate internationally as an alternative to Canadian equities and government bonds.

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