Blake Hutcheson, CEO of OMERS.Fernando Morales
The Ontario Municipal Employees Retirement System, or OMERS, said it posted a loss of 0.4%, or about $500 million, in the first six months of 2022 despite turmoil in stock markets and bondholders.
Royal Bank of Canada’s RBC I&TS All Plan universe saw defined benefit pension plan assets – measured by a typical mix of publicly held stocks and bonds – decline 14.7% during this period.
Blake Hutcheson, chief executive of OMERS, said in an interview that retirement has shifted away from public equities over time to buying more private assets. In rapidly growing markets, pension funds with large private assets can track broader stock indices. On the other hand, pension funds can outperform. “Our strategy has worked in our favor in terms of preserving and protecting our portfolio,” Hutcheson said.
OMERS is the third of Canada’s three major pension plans with fiscal years to December 31 to report semi-annual returns in 2022. On Monday, the Ontario Teachers’ Pension Plan reported a 1.2% return for the six months ended June 30. , the Caisse de depot et placement du Québec recorded a loss of 7.9%.
OMERS, like other members of Canada’s large “Maple Eight” pension plans, owns more than stocks and bonds; it moved to infrastructure, real estate and other private assets.
The funds’ variable returns for the first half of 2022 were due to differences in their portfolios.
As of June 30, the Caisse held 75% of its assets in equities and fixed-income securities. In contrast, OMERS held about half of its portfolio in public stocks, bonds and credit investments as of June 30. Teachers had just under half of its assets. in equities and fixed income, with around 20% of his portfolio in what he calls “inflation-sensitive” assets, designed to perform better in inflationary environments.
Jonathan Simmons, chief financial and strategic officer of OMERS, said the allocation to private investments, coupled with decisions to favor quality over growth stocks and short-term credit over long-term bonds, protected OMERS ” of the worst six-month market period”. losses incurred by investors for more than 50 years.
OMERS said its public stocks — publicly traded stocks — fell 13.2%, but the private equity division returned 7.7%. Together, the two represent approximately 40% of OMERS portfolio as of June 30.
Mr Simmons said in an interview that OMERS is seeing around 10% year-over-year earnings growth for companies in its private equity portfolio, even before they have increased earnings by acquiring new businesses.
Infrastructure returned 4.8%, while real estate returned 9.9%. These two asset classes represent around a third of the portfolio.
Mr. Hutcheson said in the interview that OMERS real estate arm, Oxford Properties, has moved away from commercial real estate, bringing it down to around 10% of the portfolio, and has shifted to buying properties. industrial, life science and multi-family buildings. residential properties.
Bonds and credit investments – together about a quarter of OMERS assets – lost 2.5% and 1.8%, respectively.
OMERS reported assets of $119.5 billion as of June 30. The 10-year annualized return to June 30 was 7.5%.
OMERS has over half a million members, municipal employees in communities across Ontario.
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