Ontario Teachers’ post 4% annual return as private assets provide boost

“The changes made to the portfolio over the past few years addressed many of the challenges of high inflation,” said Ziad Hindo, chief investment officer, in a release. “Assets correlated to inflation such as commodities, natural resources and infrastructure all performed well last year.”

While Ontario Teachers’ public equities declined 12.5% and bonds dropped 5.9%, its infrastructure holdings gained 18.7% and private equity rose by 6.1%.

As of Dec. 31, private equity assets totalled $58.3 billion of the plan’s $244.1-billion total, compared to $21.9 billion in public equities.

Bonds totalled $76.2 billion at year end, and infrastructure assets made up $39.8 billion.

Inflation-sensitive assets such as commodities ($25 billion at year end) and natural resources ($10.1 billion) rose 19.5% and 29.6%, respectively.

Real assets ($28.1 billion), on the other hand, declined by 3.5% in 2022 and innovation assets ($7.4 billion) plunged by 12.1%. In November, the plan said it was writing down its US$95-million investment in failed crypto-trading platform FTX.

The plan reported total investment costs of $1.89 billion in 2022, or 78 cents per $100 of average net assets. That was down from $2.03 billion or 91 cents per $100 in 2021, owing to fewer acquisitions and lower performance-based fees to external managers.

Ontario Teachers’ 4% return beat its internal benchmark of 2.3%. The performance compared to a 4.2% return for OMERS last year, and a 5.6% loss for the Caisse de dépôt et placement du Québec.

Canada’s largest pension fund, CPP Investments, has a March 31 year-end but it posted a net return of negative 2.2% for the nine months ended Dec. 31.

Ontario Teachers’ total annualized return since inception in 1990 is 9.5%, while its 10-year annualized return is 8.5%.

The plan was fully funded on Jan. 1 with a $17.5-billion preliminary funding surplus, marking the 10^th consecutive fully funded year.