The Ontario Teachers’ Pension Plan reached an asset total of $180.5 billion as of June 30, 2017, representing a $4.9-billion increase since the start of the year.
“Central banks are pulling liquidity and the geopolitical realities speak for themselves. While these factors lend uncertainty to markets, I’m pleased we had a half year with solid returns,” said chief executive officer Ron Mock during the plan’s mid-year conference call.
The plan’s net return was 3.6 per cent, equalling an investment income of $6.4 billion. “These results illustrate that we have remained disciplined and are executing against our strategy of investing for the long term,” said Mock.
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Shifts in asset class exposure have been broadly positive for the fund. “As we balance our portfolio risk, we have increased our exposure to private asset classes while decreasing our exposure to public equities,” said Bjarne Graven Larsen, chief investment officer. “At the same time, we are leveraging our core active management strength across all asset classes. As such, we have reduced out allocation to passive equity investments and increased our allocation to actively managed investments.”
Inflation-sensitive assets were the only asset class that performed worse than anticipated given market conditions, said Larsen.
The Canadian dollar’s appreciation against many global currencies during the first half of the year was a significant factor to contend with. Gross asset return in local currencies was 4.5 per cent. “Currency volatility continues to be a theme in 2017, shaving 0.8 per cent from returns in the half of the year in Canadian dollar terms. This is because we invest in 37 currencies in over 50 countries but we report all assets and liability in Canadian dollars.”
“While we like foreign assets, we do not always like the associated currency risk.” The currency risk has held an evident sting in 2017 so far: in dollar terms, that 0.8 per cent meant $1.4 billion less in returns.
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