-- Plan fully funded for sixth consecutive year
Ontario Teachers' Pension Plan (Ontario Teachers') today announced net assets of $191.1 billion as of December 31, 2018, a $1.6 billion increase from December 31, 2017. The total-fund net return was 2.5% for the year.
"In 2018 we were able to generate positive returns even as we navigated some of the most volatile markets in years, thanks to the work we have done to build a diversified investment portfolio that can perform across market scenarios," said Ron Mock, President and Chief Executive Officer. "Concurrently, we are pleased to report that as of January 1, 2019, we were fully funded for a sixth consecutive year, with 100% inflation protection being provided on all pensions."
As at December 31, 2018, the Plan has had an annualized total fund net return of 9.7% since inception. The five- and ten-year net returns, also as at December 31, 2018, were 8.0% and 10.1%, respectively.
During the year the plan's volatility was subdued compared to what would have been experienced by a more traditional asset allocation. Portfolio diversification - across asset class, geography and other factors - resulted in the Fund outperforming its benchmark by 1.8% or $3.5 billion, demonstrating the value Ontario Teachers' members realize with active management.
"Times like these show how continuing to rebalance the portfolio for stability is paying off," said Ziad Hindo, Chief Investment Officer. "In 2018, our private assets carried the day. Despite a more difficult environment, we were able to conclude a number of significant, complex transactions during the year."
Detailed Asset Mix
2018 2017
Effective Net Effective Net
Investments Investments at
at Fair Value Fair Value
(Canadian $ Asset Mix (Canadian $ Asset Mix
billions) % billions) %
Equity
Publicly traded $ 31.6 17% $ 35.2 19%
Non-publicly
traded 33.4 18 31.9 17
65.0 35 67.1 36
Fixed income
Bonds 58.2 31 41.4 22
Real-rate products 19.5 10 20.0 11
77.7 41 61.4 33
Inflation sensitive
Commodities 10.6 6 11.1 6
Natural resources 8.1 4 6.6 3
Inflation hedge 8.7 5 8.9 5
27.4 15 26.6 14
Real assets
Real estate 27.5 15 25.5 14
Infrastructure 17.8 9 18.7 10
Real-rate products 4.3 2 1.5 1
49.6 26 45.7 25
Credit 15.2 8 13.6 7
Absolute return
strategies 12.6 7 10.7 6
Overlay (0.4) -- (0.3) --
Money market (59.5) (32) (39.4) (21)
Net investments[1] $ 187.6 100% $ 185.4 100%
[1] Net investments, which comprise investments less investment-related liabilities per the December 31, 2018 Consolidated Statements of Financial Position, exclude all other assets and liabilities.
Total fund local return was 1.3%. The Plan invests in 35 global currencies and in more than 50 countries, but reports its assets and liabilities in Canadian dollars. In 2018, currency had a positive, +1.5% impact on the total fund, resulting in a gain of $2.8 billion that was mainly driven by the appreciation of the U.S. dollar. The positive impact followed negative currency impacts in 2017 and 2016.
About Ontario Teachers'
The Ontario Teachers' Pension Plan (Ontario Teachers') is Canada's largest single-profession pension plan, with $191.1 billion in net assets at Dec. 31, 2018. It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annual total-fund net return of 9.7% since the plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacific region office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario's 327,000 active and retired teachers.
