The group that handles the pension money of more than 400,000 Ontario municipal employees and retirees is reporting an overall investment return of 10% in 2012, up from 3.17% in 2011.

OMERS, the Ontario Municipal Employees Retirement System, said Friday that net assets grew to $60.8 billion over the year.

It also reported collecting $3.2 billion in contributions in 2012 and paying out $2.7 billion in benefits, “clearly demonstrating its ability to meet its pension obligation in the short and medium term.”

“The $5.7-billion increase in our net assets demonstrates the strength and robustness of OMERS’ business model with the capacity to generate growing investment cash yields and more than ample liquidity to withstand market shocks under stressed financial conditions,” president and CEO Michael Nobrega added in a release announcing the results.

Overall, the OMERS private market portfolio had a 13.8% investment return, which included returns of 19.2% by OMERS Private Equity, 16.9% by Oxford Properties and 12.7% by Borealis Infrastructure.

Those gains were partially offset by a negative 10.1% return by OMERS Strategic Investments.

OMERS Strategic Investments, which represents less than 2.5% of net investments, has its principal assets in Alberta’s oil and gas sector.

“The year-end valuation of these assets was negatively impacted as oil and gas prices fell to their lowest levels in five years,” OMERS said.

OMERS Capital Markets, which manages the public market portfolio including public equities, fixed income and debt investments, generated a 7.5% return.

Meanwhile, OMERS said an actuarial review as of the end 2012 showed total pension entitlements earned to date by all plan members exceeded OMERS actuarial net assets by $10 billion, resulting in a continuing funding deficit.

“This projected, long-term deficit is mainly the result of increasing liabilities and the impact of investment losses incurred as a result of the 2008 global financial crisis.”

In 2010 OMERS implemented a plan aimed at eliminating the deficit over time through measures that include a contribution increase phased in over three years and assuming a 6.5% net investment return on an annual basis.

“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,” chief financial officer Patrick Crowley said Friday.

“Solid investment returns, which have averaged 8.9% per year in the four years since the financial crisis and 8.24% over the past 10 years, combined with contribution increases, are already having a positive impact on reducing the deficit.”