CANADA - The C$41bn Ontario Municipal Employees' Retirement System (OMERS) returned 16% in 2005 and earned C$5.5bn net income, but could not prevent its actuarial deficit trebling to $2.8bn.
The fund easily beat its benchmark of 13.2%, and CEO Paul Haggis attributed the performance to the “exceptional” returns achieved from private market investments in real estate, infrastructure and private equity.
OMERS would continue to increase holding in these asset classes from 19.8% of net investment assets to 37.5%, as they were likely to outperform traditional stocks and bonds long term, and with reduced volatility, he said.
“Our asset mix strategy is working and we remain committed to increasing our asset allocation in private market investments.”
But despite the year’s gains, OMERS’ actuarial deficit increased from $963m in 2004 to $2.8bn by year end, based on actuarial assets of $38.3bn less an actuarial liability of $41.1bn.
Omers attributed the increase to the actuarial smoothing of investment returns, which meant that a portion of losses incurred in 2001 and 2002 were incorporated in the 2005 actuarial assets.
Overall the fund performed notably stronger than 2004, earning net investment income of $5.5bn, compared with $3.7bn the year before.
Looking at OMERS portfolio, public markets posted a 12.6% return and generated $4bn, up from 10.3% and $2.9bn in 2004.
The 2005 return on total investment income from private equity investments was 23.2%, with net investments at $2.5bn. This compared favourably with a 12.5% and $1.5bn the year before. OMERS attributed the increase to strong market value appreciation on several investments that realised improved financial performance as the businesses matured.
OMERS real estate investments recorded a return of 26% in 2005, significantly higher than the 11% posted in 2004.
OMERS said the complete 2005 annual report would be available in April 2006.
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