The Ontario Teachers’ Pension Plan has announced a 13.0% rate of return for the year ended December 31, 2012. Assets and the pension fund now stand at $129.5 billion, compared to $117.1 billion at the end of 2011. According to a press release, Teachers’ surpassed its consolidated 11.0% benchmark by two percentage points, or $2.2 billion. Investment earnings for 2012 were $14.7 billion, versus $11.7 billion in 2011. “Returns earned above our benchmark directly support the goal of pension security and demonstrate the value of our approach to active investing,” said Jim Leech, President and Chief Executive Officer. Leech also pointed out that Teachers’ 10-year annualized rate of return is 9.6%.
The Ontario Government and Ontario Teachers’ Federation recently balanced plan assets and liabilities by making all inflation protection on service credit earned after 2013 conditional on the plan’s funded status. The plan was 97% funded as at January 1, 2013. Teacher’s faces a big longevity challenge: members’ average retirement age is 59 and those members have the highest longevity rates in the country. On average, they can expect to be retired for five years longer than they worked. Teachers’ noted that plan now has 2,800 pensioners over the age of 90, including 107 who are 100 or more.
Returns by asset class:
– On a one-year basis, equities returned 14.2% compared to a benchmark return of 13.1% for total value added of $0.6 billion.
– Teachers’ Private Capital (TPC) returned 18.6% compared to a benchmark return of 13.3%.
– Fixed income assets returned 5.1% compared to a benchmark return of 4.5% for $0.3 billion in added value.
– Investments in commodities returned -1.9% compared to a benchmark return of -1.1%.
– Real assets (real estate, infrastructure and timberland) returned 14.7% compared to the benchmark return of 10.6% for value added of $0.6 billion.