The Ontario Teachers’ Pension Plan Board rode investments in private equity, infrastructure and credit to a 4% return in 2022, beating its benchmark in a bear market.
While many portfolios suffered last year as stock and bond markets tumbled, the large pension plan benefited from stronger returns in inflation-resistant assets.
“The changes made to the portfolio over the past few years addressed many of the challenges of high inflation,” said Ziad Hindo, chief investment officer, in a release. “Assets correlated to inflation such as commodities, natural resources and infrastructure all performed well last year.”
While Ontario Teachers’ public equities declined 12.5% and bonds dropped 5.9%, its infrastructure holdings gained 18.7% and private equity rose by 6.1%.
As of Dec. 31, private equity assets totalled $58.3 billion of the plan’s $244.1-billion total, compared to $21.9 billion in public equities.
Bonds totalled $76.2 billion at year end, and infrastructure assets made up $39.8 billion.
Inflation-sensitive assets such as commodities ($25 billion at year end) and natural resources ($10.1 billion) rose 19.5% and 29.6%, respectively.
Real assets ($28.1 billion), on the other hand, declined by 3.5% in 2022 and innovation assets ($7.4 billion) plunged by 12.1%. In November, the plan said it was writing down its US$95-million investment in failed crypto-trading platform FTX.
The plan reported total investment costs of $1.89 billion in 2022, or 78 cents per $100 of average net assets. That was down from $2.03 billion or 91 cents per $100 in 2021, owing to fewer acquisitions and lower performance-based fees to external managers.
Ontario Teachers’ 4% return beat its internal benchmark of 2.3%. The performance compared to a 4.2% return for OMERS last year, and a 5.6% loss for the Caisse de dépôt et placement du Québec.
Canada’s largest pension fund, CPP Investments, has a March 31 year-end but it posted a net return of negative 2.2% for the nine months ended Dec. 31.
Ontario Teachers’ total annualized return since inception in 1990 is 9.5%, while its 10-year annualized return is 8.5%.
The plan was fully funded on Jan. 1 with a $17.5-billion preliminary funding surplus, marking the 10th consecutive fully funded year.