Ontario Teachers' Pension Plan, Toronto, returned a net 4.2% on its investments in 2016, vs. its 3.5% custom benchmark return and its 13% net return the previous year, the pension plan announced Wednesday.
Most of its broad asset classes, except for its natural resources portfolio, saw returns last year that were lower than 2015.
The plan had total assets of C$175.6 billion ($130.6 billion) as of Jan. 1, up 2.4% from 12 months earlier. OTPP's funded status as of Jan. 1 was 105% compared to 107% at the start of 2016.
As of Dec. 31, Ontario Teachers' returned a net 10.5% for five years, 7.3% for 10 years, and 10.1% since the plan's inception in 1990. All multiyear returns are annualized.
The 2016 returns added C$1.3 billion in investment income.
Concerning the 4.2% return for the year, “We're actually pretty happy about the return,” said Bjarne Graven Larsen, chief investment officer, at a news conference announcing the returns. “The 4.2% return consists of the underlying assets. That's a pretty good return given the market conditions.”
Overall, Ontario Teachers' foreign investments returned 7.2% in local currencies but, when converted to Canadian dollars, the investments lost -2.8%.
“We had a great year, the highest outperformance in 2015. It was a record year in that sense. Still our added returns above the benchmark we're pretty solid,” Mr. Larsen said.
In 2016, the pension fund's C$10.5 billion in natural resources returned 8.3%, above its 6.7% custom benchmark and the -1.6% return in 2015.
Real estate, managed by subsidiary Cadillac Fairview, totaled C$26.5 billion in assets and returned 7.7%, vs. the 7.4% custom benchmark and the 12.9% return in the previous year.
Its combined C$66 billion public and private equity portfolio returned 4.8%, compared to its 4.9% custom benchmark and the 17.7% return in 2015.
OTPP's private equity unit, Teachers' Private Capital, returned 4.3% on its C$26.6 billion portfolio, below its 5.4% custom benchmark and the 32.3% return in the previous year.
Infrastructure, with C$17.8 billion in investments, returned 1.4% vs. its custom benchmark's -2.3% and the 21.4% return in 2015. Fixed income, with C$75.2 billion in assets, returned 0.8% vs. the 1% custom benchmark return and the 5.9% return the previous year.
(The pension fund does not break out public equity returns or posts results on its remaining assets in absolute return and money market investments.)
Ron Mock, Ontario Teachers president and CEO, said, “I think we're in a good place,” despite currency and future geopolitical risk, but Mr. Mock added, “It wouldn't surprise me if we spend a lot of time muddling through the process in 2017. In the U.S., we're seeing that it's not all that simple to get things done, and Brexit will not be an easy thing to get through. That uncertainty will put a floor and cap on the markets.”