OMERS announced today that its total rate of return was 16.4% in 2006, a top-quartile performance that exceeded its benchmark return of 13.7%.
This is the fourth year in a row in the giant Ontario pension fund has achieved a double-digit return, earning net investment income for 2006 of $6.5 billion, compared with $5.5 billion in 2005.
The fair market value of net assets increased 15.9%, to total $47.6 billion as at Dec. 31, 2006, up from $41.1 billion the previous year.
“OMERS strong 2006 returns were due to the successful execution of our investment strategy, anchored by the buoyant public markets and the strong returns realized by all three private market lines of business — real estate, infrastructure and private equity,” said OMERS president and CEO, Paul Haggis.
OMERS is continuing its long-term strategy to increase its holdings in private equities, real estate and infrastructure from the current 24.2% to 37.5% of net investment assets. OMERS anticipates that over the long-term, an asset mix with greater exposure to private market investments is better positioned to generate strong, predictable returns and consistent cash flow with reduced risk to meet its funding requirements.
OMERS received $1.8 billion in pension contributions in 2006, compared to $1.5 billion in 2005. Pension and other benefit payments totalled $1.7 billion in 2006, an increase from $1.6 billion in the previous year.
Public markets generated net investment income of $4,870 million compared with $4,041 million a year earlier. The increase from the prior year is attributable to significantly higher returns in non-Canadian public equity markets in 2006.
Private equity investments generated net investment income of $360 million, compared with $383 million last year. Although income was quite strong in 2006, the change from 2005 was the result of lower market valuation adjustments resulting primarily from our exposure to the oil industry which saw reduced prices during the year. During 2006, private equity investments increased from $2.4 billion to $2.9 billion and now account for approximately 6.0% of net investment assets with a long-term goal of 10.0%.
Infrastructure investments generated net investment income of $388 million, compared with $393 million a year earlier. In 2006 lower earnings generated by the energy sector were offset by more positive earnings generated by other sectors in the infrastructure portfolio.
OMERS real estate generated net investment income of $1,016 million (including operating income of $350 million) as compared with net investment income of $790 million (including operating income of $392 million) a year earlier. Real estate investment income in 2006 significantly exceeded the previous year primarily as a result of gains on sales of properties and favourable market value appreciation in the year, particularly in the office portfolio in the cities of Edmonton, Calgary and Vancouver.
OMERS provides retirement benefits to approximately 372,000 members on behalf of over 900 local government employers across the province.
OMERS reports return of 16.4% in 2006
Pension giant looks to increase presence in private equities
- By: IE Staff
- February 26, 2007 February 26, 2007
- 11:20