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Pension Funds

Ontario Teachers returns 3.2% in first half of 2018

Ontario Teachers' Pension Plan, Toronto, returned a net 3.2% on its investments for the first six months of 2018, helping increase its total assets to C$193.9 billion ($146.9 billion) as of June 30, the plan announced Wednesday.

Pension fund assets rose 2.1% from start of 2018.

In the first half of 2017, the plan returned 3.6%.

The pension fund earned C$6.16 billion from its investments in the first half of this year and took in a combined C$1.59 billion from employer and employee contributions, according to OTPP's financial statements.

Ontario Teachers' discount rate was 3.05% as of June 30, vs. 2.95% on Dec. 31.

The overall allocation as of June 30 was 35% fixed income; 18% public equity; 17% private equity; 16% inflation-sensitive investments (commodities, natural resources and inflation hedge); 14% real estate; 9% infrastructure; 7% each credit and absolute return; and 2% real return. The plan had an additional 25% used for liquidity purposes.

As of Dec. 31, the plan had 33% in fixed income, 19% public equity, 17% private equity, 14% each inflation-sensitive investments and real estate, 10% infrastructure, 7% credit, 6% absolute return and 1% real return. The plan had an additional 21% used for liquidity.

Returns in equities, inflation-sensitive investments and real assets drove the first-half investment gains, Ziad Hindo, chief investment officer, said in a news conference Wednesday.

The pension plan does not provide midyear return breakouts for individual asset classes or related benchmark returns.

The plan's investment return based on local currency in the first half was a net 2.6%, but foreign currency added C$1.7 billion, mainly from the appreciation of the U.S. dollar. Ron Mock, president and CEO, said in the news conference. "Currency can work for us and against us," Mr. Mock said. "It just so happened that in the first half, we benefited from it."

Mr. Mock also said Ontario Teachers has a "different approach" than the Canada Pension Plan Investment Board, Toronto, when it comes to China investments. That comment followed reports this week that CPPIB, which manages the assets of the C$366.6 billion Canada Pension Plan, Ottawa, was planning to invest up to 20% of its assets in China in the next seven years.

"We have a bottom-up approach that has served us well in a market that, quite frankly, is expensive," Mr. Mock said. "Investing in China is an important component in our investment strategy, but we have not looked at ... increasing it to double or triple what we have invested. Others look at it differently."