Teachers’ pension assets hit all-time high in 2011

Despite strong gains, plan faces $9.6 billion funding shortfall

By: James Langton
April 3, 2012 April 3, 2012
16:20

The Ontario Teachers’ Pension Plan beat its benchmark and pushed its net assets totals to an all-time high in 2011, but still faces the prospect of funding shortfalls, the pension giant reported on Tuesday.

Teachers said that its 11.2% return in 2011 added $11.7 billion to the plan’s net assets, pushing total assets to $117.1 billion at December 31. Overall, the pension fund earned 1.4% above its 9.8% benchmark, or $1.4 billion in value-added returns (above its composite benchmark).

Private capital, fixed income and infrastructure were the fund’s asset class leaders, it says.

“Our team’s 2011 performance was especially impressive, given the market volatility and economic uncertainty that accompanied the Eurozone debt situation, and was compounded by the year’s natural disasters,” said Jim Leech, Teachers’ president and CEO.

The combined value of the plan’s public and private equities was $51.7 billion at year-end, compared to $47.5 billion as of December 31, 2010.

Private equity assets managed by Teachers’ Private Capital totaled $12.2 billion at year-end, compared to $12 billion the previous year. The plan reports that its private investments returned 16.8%, and generated $1.6 billion in value added.

Fixed income assets rose to $55.8 billion at year-end, compared to $45.9 billion at December 31, 2010, and returned 19.9%, compared to a benchmark return of 19.5%, for $163.4 million in added value, it says.

Notwithstanding the strong returns, and efforts to balance the fund by raising contribution rates and lowering benefits, the plan still faces the issues of persistent low interest rates and changing demographic trends.

“The result is a preliminary $9.6 billion funding shortfall, as of January 1, 2012,” said Leech. “Our liabilities, that is, the projected cost of providing future pensions, continue to outpace our projected asset growth. Accordingly, we are working with our sponsors, Ontario Teachers’ Federation and the Ontario government, to advise them on the various options for closing this gap at a reasonable cost.”