OMERS ended 2011 with an all-time high of $55.1 billion in net assets—an increase of almost $12 billion since the 2008 global credit crisis. The pension plan attributes its success to a diversified asset mix that helped protect it from market volatility.
“Our view of risk is shaped by prudent use of debt, stringent investment criteria and rigorous discipline in all our investment decisions,” said Michael Nobrega, president and CEO of OMERS. “This view is in line with protecting capital and ensuring liquidity for our plan members in turbulent market conditions. We are proud of our track record of solid investment returns, our triple ‘A’ credit rating, and our reputation as a responsible, long-term investor.”
Why OMERS is changing gears
OMERS launches venture capital investment armOMERS generated a positive investment return of 3.17% in 2011, earning $1.7 billion and exceeding the performance benchmark by 65 basis points. Its private market portfolio generated a return of 8.2%, while its public markets portfolio generated an investment return of negative 0.22%.
The plan’s asset classes include real estate, infrastructure and private equity, which it says helped it to generate a positive return last year despite difficult macroeconomic conditions, such as the European sovereign debt crisis, on public equity markets around the world.
“Regarding the public markets, 2011 was truly a tale of two halves. The markets started the year strong, building on the momentum of 2009 and 2010. This changed dramatically in the latter half of the year where we saw daily market volatility reminiscent of the last recession,” said Nobrega.
Asset mix is a key driver of the pension fund’s strategic plan. OMERS ended the year with 58% of its assets in the public markets and 42% in private assets, compared with 82% public and 18% private in 2003. The long-term goal is to achieve a mix of approximately 53% public and 47% private market investments.
Yet despite the plan’s positive year, it still faces a substantial funding deficit. For 2011, OMERS had a funding deficit of $7.3 billion, compared to $4.5 billion just a year earlier.
“Like that of many other pension plans, OMERS funding deficit position primarily reflects the continuing impact of the 2008 global economic downturn and increasing actuarial liabilities due to plan demographic shifts,” said Patrick Crowley, chief financial officer with OMERS. However, OMERS says that based on expected returns, combined with temporary contribution increases and benefits reductions, the plan should return to surplus within 10 to 15 years.