OPTrust reports -2.2% net return in 2022

OPSEU Pension Trust delivered a net investment return of -2.2% in 2022 and an annualized net 7.8% return for the 10-year period ended Dec. 31, according to its funded status report issued on Tuesday.

In 2021, OPTrust returned a net 15.3%.

OPTrust said in the report that its 2022 performance reflected "sharp declines in the value of public equity and fixed income securities," and described 2022 as "among the most difficult investment environments in decades."

OPTrust, which manages the assets of the C$24.6 billion ($17.8 billion) Ontario Public Service Employees Union Pension Plan, Toronto, was fully funded for the 14th straight year, with C$28.72 billion in assets and C$4.08 billion in liabilities, the report said.

OPTrust does not provide benchmark returns.

OPTrust's liability-hedging portfolio, which is composed of Canadian federal and provincial government bonds and represented 21.4% of assets, returned a net -20.6% in 2022 as market interest rates increased "significantly."

OPTrust's return-seeking portfolio, which represented 85.7% of assets, returned a net 2.7% in 2022.

OPTrust's risk-mitigation portfolio represented 11.3% of assets and returned a net -7.3% during the year.

OPTrust also has a funding portfolio, which represented -18.4% of assets, according to the report. The portfolio includes bond repurchase agreements and implied funding from derivatives, the report noted.

Within the return-seeking portfolio, the best performing asset classes in 2022 comprised the infrastructure, real estate and private equity portfolios which delivered net returns of 21.1%, 15% and 4.8%, respectively.

Infrastructure, real estate and private equity accounted for 16.1%, 18.9% and 16.1% of assets, respectively.

Strong performance by these illiquid assets helped to offset total portfolio losses from public market assets, the report noted.

The worst performing asset classes comprised public equity (-17.6%), commodities (-7.1%), credit (-3.5%) and multi-strategy investments (-1.4%). Public equity, commodities, credit and multi-strategy accounted for 11.8%, 1.9%, 9.8% and 10.9% of total assets, respectively.

OPTrust noted in the report that 2022 was "challenging year" for public equity investments due to an "unfavorable macroeconomic backdrop and difficult conditions in equity markets." Another asset class, characterized as "other" accounted for just 0.2% of assets and returned a net -54.5% in the year. A spokesman for OPTrust said by email that the "other" category "contains our incubation portfolio, which was created to enable investment teams to test, in a risk-controlled way, new investment themes with the potential to deliver outsized benefits for the total fund over time. It also allows our teams to gain exposure to, and returns and learnings from, emerging trends or earlier-stage ideas that may not fall squarely within the definitions of an existing asset class."