Ontario Teachers’ return tops benchmark in 2017

Ontario Teachers' Pension Plan, Toronto, had a net investment return of 9.7% in 2017, helping raise its total assets to C$189.5 billion ($151 billion) as of Dec. 31, Ron Mock, president, CEO and interim chief investment officer, said Tuesday.

OTPP's return was above its custom benchmark's 8.2% return. Ontario Teachers returned 4.2% in 2016.

OTPP's funded status as of Jan. 1 was 105%, unchanged from the start of 2017.

As of Dec. 31, Ontario Teachers returned a net 9.6% for five years, 7.6% for 10 years, and 9.9% since the plan's inception in 1990. All multiyear returns are annualized.

The 2017 returns added C$17 billion in investment income.

Ontario Teachers' private equity portfolio had the highest return among the plan's investment classes for the year ended Dec. 31, at 18.8%. Its infrastructure portfolio returned 18.2%; public equity allocation, 17.6%; real estate, 6.9%; fixed income, 2.6%; credit, 1.7%; and inflation-sensitive investments, -3.2%. (The pension fund does not break out public equity returns or posts results on its remaining assets in absolute return and money market investments.)

Mr. Mock in a conference call with reporters said that for now, recent market volatility was no cause for alarm and that Ontario Teachers would stay the course on its investments. "At the margins, we may be able to find the odd opportunity," Mr. Mock said. "but we only make changes when things are at extreme levels, and we're far from that now."

The global threat of a trade war resulting from increased tariffs as well as negotiations over the North American Free Trade Agreement are being monitored by pension plan officials, Mr. Mock said.

"We're watching to see what impact there might be," Mr. Mock said, adding, "We're not holding back on our investments" as a result of NAFTA concerns.

"It's not just NAFTA but it's also a global issue," Mr. Mock said. "Tariffs are essentially imposing taxes between countries. While there's a lot of bluster going on, we expect cooler heads to prevail. If we do see tariffs and retaliatory tariffs rise, I'm quite certain central banks are watching. If (increased tariffs) manifests itself in terms of impacting growth, I have full expectations that central banks will react accordingly."

OTPP's 2017 annual report was posted Tuesday on its website.