The Ontario Teachers’ Pension Plan (Teachers’) today reported an 11.2% rate of return for 2011, boosting net assets to $117.1 billion, an all-time high for the plan. The returns beat Teachers’ 9.8% benchmark, behind strong performances in private capital, fixed income and infrastructure.
“Our team’s 2011 performance was especially impressive, given the market volatility and economic uncertainty that accompanied the eurozone debt situation, and was compounded by the year’s natural disasters,” said Jim Leech, Teachers’ president and CEO.
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This is the 10th consecutive year that Teachers’ has faced a preliminary shortfall. In a presentation announcing the results, Leech pointed out that while the plan is currently 94% funded, projections indicate that, at the current pace, the deficit between contributions and benefits paid out will reach $4.1 billion by 2031.
“We’re not in a crisis situation, but, at the same time, action is required now to ensure our pension promise is fulfilled,” he said.
Leech noted that the plan is working closely with its sponsors—Ontario Teachers’ Federation and the Ontario government—to explore ways to close this gap, including raising contribution rates and lowering benefits.
In terms of 2011 asset class performance, Teachers’ fixed income assets rose to $55.8 billion, compared with $45.9 billion at Dec. 31, 2010, and returned 19.9%, compared with a benchmark return of 19.5%.
Public and private equities held a combined value of $51.7 billion, returning -0.8%, compared with a -5.1% benchmark. Private equities were particularly strong, Leech noted, returning 16.8% in 2011 against a benchmark of -0.2%, led by the divestment of Maple Leaf Sports and Entertainment to Rogers and BCE.
The fund’s commodities investments totalled $5.7 billion at year-end, compared with $5.2 billion at Dec. 31, 2010. And the fund returned -2.3%, compared with the -1.5% benchmark return.
The rate of return for Teachers’ real assets was 13.1%, just shy of the benchmark (13.3%). Infrastructure was the benchmark beater in this group, returning 7.7%, compared with an expected 6.1%. Real estate returned 18.2%, against a 21.8% benchmark, and timberland returned 0.8%, versus a benchmark of 10.2%.
Commodities returned -2.3% for Teachers’ in 2011, against a benchmark of 1.5%.