The Healthcare of Ontario Pension Plan (HOOPP) reported its strongest return in decades, ending 2014 up 17.7%, with net assets topping $60.8 billion and a funded status of 115% up from 114%.
The solid performance puts it squarely into surplus territory, said HOOPP CEO Jim Keohane at a press conference on Wednesday where he outlined a series of benefits enhancements being delivered to HOOPP members.
Keohane said HOOPP will keep contribution rates steady at a time when other plans are under pressure to raise costs. HOOPP is also moving to full index inflation once again, having reduced it to 75% in 2002 in response to a deficit.
Read: HOOPP’s assets top $51 billion
Said Keohane, the strong results mean that HOOPP now has the highest 10-year return among its global pension peers, according to Toronto-based firm CEM Benchmarking.
Contributing to the positive results has been HOOPP’s active management strategy, which generated an additional 2.1% based on strong performance in the fund’s private equity group (19%) and real estate (9.8%) as well as good results from a series of internally run absolute return strategies.
Keohane has his eye on high valuations in a number of areas, including public equities. While valuations are currently high, however, he doesn’t believe they’re at extreme levels.
HOOPP is currently underweight U.S. equities and overweight Canada. “Canadian valuations are down below fair valuations,” he said.
Keohane also added that although real estate is overvalued, the pension fund believes that, for the long term, it remains an excellent hedge against wage inflation due to the high correlation between real estate and wage gains. HOOPP remains focused on its investments in new buildings in Toronto, Vancouver and London.
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