The Ontario Teachers’ Pension Plan (OTPP) today announced that the fund’s net assets increased in 2005 to $96.1 billion from $84.3 billion in 2004. Income from investments was $14.1 billion, up from $10.8 billion in 2004, for total income of $24.9 billion over two years.
The pension plan’s one-year rate of return was 17.2%, 4.5% above the performance of the markets as reflected in its composite benchmark of 12.7%.
Since the fund was created 16 years ago, the plan’s long-term rate of return has averaged 11.7% per year. During this period, the fund has grown to $96.1 billion from less than $20 billion, and paid out $32.5 billion in pension benefits.
“Our investment managers have delivered performance ahead of composite benchmark performance not only for the past year, but over the longer term,” said Claude Lamoureux, Teachers’ president and CEO, in a release.
“With long-term interest rates as low as they have been in recent years, Bob Bertram and his team are under considerable pressure to find investments with the returns that can meet the fund’s growing needs, while decreasing its risk exposure,” said Lamoureux.
“Our results reflect the real benefits of broad diversification, a total fund active management style, and a qualified, in-house investment team,” noted Bertram, executive vp, investments.”
Public and private equities in total returned 17.9% compared to the benchmark of 14.7%, ending 2005 with $46 billion in assets, compared to $39.9 billion at the end of 2004. Equities continued to represent 49% of the total fund at 2005 year-end.
Fixed income, which includes absolute return strategies and hedge funds, had a 15.3% rate of return in 2005, compared to the one-year benchmark of 11.8%. Fixed income assets in 2005 totalled $18.4 billion, and represented 19% of the fund’s total assets at year-end 2005, compared to $13.9 billion and 17% at the end of 2004.
Real estate, managed by The Cadillac Fairview Corporation Ltd., had total assets of $12.5 billion at the end of 2005, compared to $10.9 billion at the end of 2004, creating $1.6 billion in value added for the fund in 2005. Real estate had a 21.3% rate of return in 2005, compared to a 6.2% benchmark. Real estate continued to represent 13% of total assets at the end of 2005.
The plan paid out a total of $3.6 billion in pension benefits in 2005. Contributions from active teachers were matched by the Ontario government and other employers and totalled $1.6 billion for the year. At the end of the year there were 101,000 pensioners and 163,000 active teachers in the plan.
Despite strong investment returns, the plan’s funding shortfall continued to grow. The preliminary actuarial valuation as at January 1, 2006 showed that the plan’s future pension benefits were 77% funded, down from 84% a year earlier.