The Healthcare of Ontario Pension Plan (HOOPP) reached a significant milestone at the end of 2016 – its funded status hit 122% after a year in which investments grew by 10.35%. HOOPP’s assets now stand at 70.4 billion, up from $63.9 billion in 2015.
HOOPP’s membership also rose, topping 200,000 active members for the first time – and 90,000 retired pensioners for the first time.
Jim Keohane, HOOPP’s president and CEO commented that 2016 was a highly volatile year for investors, marked by poor equity market performance in January, Brexit, and the surprise outcome of the U.S. Presidential election. Keohane commented that, while HOOPP’s benchmark return was 6.12%, active management contributed to an additional 4.32% return, with all asset classes contributing positively to the results.
“Results were strong across the board,” said Keohane, adding that hedge funds, fixed income strategies, tactical asset allocation, private equity and real estate all performed well.
Keohane added that HOOPP’s strong funded status will allow it to weather a potential downturn in the market and HOOPP’s board is also considering benefit improvements for members as well.
“Market valuations high”
When asked about the big risks in the market going forward, Keohane expressed his concerns about valuations – “Valuations are high across the board,” he explained, adding that those high valuations don’t leave “much room for error” — “We don’t see a recession on the horizon, but if there were a downturn there is no room for error and the market could decline materially.”
At the same time, Keohane says investors have taken on more risk than they understand as they continue to chase yield – “A lot of investors have moved up the risk curve to get yield in their investment portfolios,” he said. “Many of those investors are not in a position to absorb that risk. If people start running for the exists that’s going to be problematic.”