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Healthcare of Ontario Pension Plan returns 10.35% in 2016, above its benchmark

Healthcare of Ontario Pension Plan, Toronto, on Thursday announced it returned a net 10.35% on its investments in 2016, with the plan’s assets reaching C$70.4 billion ($52.3 billion) as of Dec. 31.

The funded status was 122% as of the end of 2016, unchanged from the previous year.

The 2016 return surpassed the pension plan’s 5.1% return in 2015 and also beat the 6.12% return of its custom benchmark for 2016, HOOPP said in a news release.

The plan’s investments returned 9.08% for 10 years and 9.12% for 20 years, both annualized and as of Dec. 31.

Plan assets were up 10.2% from the end of 2015. Investment income for the year was C$6.6 billion, up 113% from 2015.

The discount rate in 2016 was lowered to 5.45%, from 5.65% in 2015.

The majority of HOOPP’s investment income in 2016 came from its return-seeking portfolio, which accounted for 62% of overall investment income vs. 38% in 2015. In 2016, private equity and public equity, which make up the portfolio, returned 15% and 12.9%, respectively.

HOOPP’s liability hedge portfolio — nominal bonds, real estate and real-return bonds — provided 38% of the pension fund’s investment income compared to 62% in 2015. Real estate returned 12.2%, while real-return bonds gained 6.8% and nominal bonds returned 3.9%.

Public equity returns in 2016 “were broad-based,” Jim Keohane, president and CEO of HOOPP, said in an interview. “We were defensively positioned last year and were underweight at the start of the year, but we were able to buy stocks early and the return from that level was very high.”

This year should be a challenging one for the overall investment environment, Mr. Keohane said. “Valuations are very high again, which makes it tough to find good investments. We’re being cautious again. We can be patient.”