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Ontario Public Service pension plan returns 6% in 2016, topping benchmark

Ontario Public Service Employees Union Pension Plan, Toronto, returned 6% on its investments in 2016, vs. its 3.6% custom benchmark return, according to a funded status report issued Monday by OPTrust, manager of the plan's assets.

The returns helped increase the plan's funding level to 133% and its total assets to C$19.05 billion ($14.1 billion), both as of Dec. 31.

The plan returned 8% on its investments in 2015, ending that year at 128% funded and with C$18.4 billion in assets.

Investments contributed C$681 million to the plan in 2016, while combined employer and employee contributions added C$529 million.

The plan's discount rate as of Dec. 31 was 3.4%, down from 3.55% the previous year.

Private equity had the highest return for the plan in 2016, at 20.6%, followed by infrastructure with 11.1%; real estate, 10.8%; public equity, 9.9%; fixed income and absolute return, 1.1% each; and cash, 0.7%

The plan's asset allocation as of Dec. 31 was 24.9% fixed income, 18.2% public equity, 15.4% absolute return, 15.1% real estate, 10.8% infrastructure, 8.4% private equity and the remainder in cash.

In an interview, Hugh O'Reilly, president and CEO, said he was pleased with the return of OPTrust's alternative investments, all of which are managed internally. “Our plan is to be aggressive on the alternative side,” Mr. O'Reilly said. “With our risk allocation, we're looking at going as high as 45% total in infrastructure, real estate and private equity together.” However, he said, OPTrust has no plans this year to change its overall asset allocation.

Also, Mr. O'Reilly said, OPTrust is changing its view toward being a risk allocator as opposed to an asset allocator. “We're blessed to have a surplus (of assets). Therefore, it's axiomatic to make adjustments based on risk,” he said.

As part of the changes, OPTrust is now issuing funded status reports, previously called annual reports, Mr. O'Reilly said. “We want to change the focus,” he said. “We want to be judged on our funded status, to reflect that everything we do is member-driven.”

The full report is on OPTrust's website.