Net assets reach record $129.5 billion
Pension plan is 97% funded
TORONTO, April 2, 2013 /CNW/ - The Ontario Teachers' Pension Plan
(Teachers') today announced a 13.0% rate of return for the year ended
December 31, 2012, which drove up net assets to $129.5 billion,
compared to $117.1 billion at the end of 2011.
The plan surpassed its consolidated 11.0% benchmark by two percentage
points, or $2.2 billion. Investment earnings for 2012 were $14.7
billion, versus $11.7 billion in 2011. Since the plan's inception in
1990, the total investment income generated has accounted for 77% of
the funding of members' pensions, compared with the combined 23% from
member and government contributions.
"Returns earned above our benchmark directly support the goal of pension
security and demonstrate the value of our approach to active
investing," said Jim Leech, President and Chief Executive Officer.
"The investment team successfully navigated significant risks and
turmoil in the global economy again in 2012 to earn an excellent rate
of return. Our 10-year annualized rate of return is 9.6%," he said.
According to CEM Benchmarking's latest data, reported in 2012,
Teachers' absolute and value-add returns were rated number one among
its peers globally for the year ended 2011.
Mr. Leech noted that the fund's total value has nearly doubled since
2002, when net assets totaled $66.2 billion.
Teachers' Quality Service Index, which measures members' satisfaction
based on survey responses, also increased in 2012, to 9.1 out of 10.
"This was an outstanding achievement during a challenging year
characterized by a 26% increase in retirements, the introduction of
reduced inflation protection for post-2009 service, and the
implementation of numerous plan and regulatory changes," said Mr.
While the plan's sponsors, the Ontario Government and Ontario Teachers'
Federation, balanced plan assets and liabilities as at January 1, 2012,
by making all inflation protection on service credit earned after 2013
conditional on the plan's funded status, a $5.1 billion preliminary
funding shortfall as at January 1, 2013, is projected. This shortfall
was anticipated, given that declining interest rates drive up the
projected cost of future benefits. The plan was 97% funded as at
January 1, 2013.
In addition to low interest rates, the sponsors recognize the impact on
projected liabilities from the imbalance between the average number of
years worked (26 years) and those on pension (31 years), and the
decreasing ratio of working-to-retired members.
"We are encouraged to see that the sponsors have committed to address
the imbalance for the next valuation filing with the regulator," said
Members' average retirement age in 2012 was 59, and with longevity rates
among the highest in the country, they are expected on average to be
retired for five years longer than they worked. The plan now has 2,800
pensioners over the age of 90, including 107 who are 100 or more.
"While the defined benefit pension is far and away the superior and
least expensive model for retirement financing because it pools
funding, longevity and asset mix risk, it must evolve to this new
demographic and financial reality," said Mr. Leech. "This means
building flexibility into the cost of benefits to ensure their
affordability for pension plan members and sponsors alike for years to
2012 investment return highlights by asset class
The value of the plan's equity investments (both public and private)
totalled $59.5 billion at year end compared to $51.7 billion at
December 31, 2011, as additional capital was deployed to manage the
asset mix. On a one-year basis, equities returned 14.2% compared to a
benchmark return of 13.1% for total value added of $0.6 billion.
Teachers' Private Capital (TPC) investments totalled $12.0 billion at
year end compared to $12.2 billion at December 31, 2011, and returned
18.6% compared to a benchmark return of 13.3%. The department generated
$0.5 billion in value added above a $1.5 billion benchmark return.
Fixed income assets totalled $60.0 billion at year end compared to $55.8
billion at December 31, 2011, and returned 5.1% compared to a benchmark
return of 4.5% for $0.3 billion in added value.
Investments in commodities were $7.0 billion at year end compared to
$5.7 billion at December 31, 2011. The portfolio returned -1.9%
compared to a benchmark return of -1.1%.
Real assets, which comprise real estate, infrastructure and timberland,
in aggregate totalled $28.7 billion at year end compared to $25.8
billion at year-end 2011 and returned 14.7% compared to the benchmark
return of 10.6% for value added of $0.6 billion.
The real estate portfolio, managed by the plan's wholly owned subsidiary
Cadillac Fairview, totalled $16.9 billion and returned 19.4% compared
to a benchmark return of 15.5% for the year ended December 31, 2012,
for $0.5 billion in value added. The infrastructure portfolio totalled
$9.6 billion at year end compared to $8.7 billion at December 31, 2011.
Infrastructure assets returned 8.4% compared to a benchmark return of
8.0% for $0.1 billion in value added. Timberland investments were $2.2
billion at year end, compared to $2.1 billion at December 31, 2011, and
delivered a one-year return of 3.4% compared to a benchmark return of
With $129.5 billion in net assets as of December 31, 2012, the Ontario
Teachers' Pension Plan is the largest single-profession pension plan in
Canada. An independent organization, it invests the pension fund's
assets and administers the pensions of 303,000 active and retired
teachers in Ontario. For more information, including our 2012 and
previous annual reports, visit www.otpp.com. Follow us @OtppInfo
Image with caption: "Since Teachers' inception in 1990, active management has accounted for 34% of total income and, with compounding, has added $60.5 billion to plan assets above benchmark returns. (CNW Group/Ontario Teachers' Pension Plan)". Image available at: http://photos.newswire.ca/images/download/20130402_C9647_PHOTO_EN_24976.jpg
Image with caption: "Preliminary Funding Valuation graph (CNW Group/Ontario Teachers' Pension Plan)". Image available at: http://photos.newswire.ca/images/download/20130402_C9647_PHOTO_EN_24989.jpg
Image with caption: "Rates of Return Compared to Benchmark chart (CNW Group/Ontario Teachers' Pension Plan)". Image available at: http://photos.newswire.ca/images/download/20130402_C9647_PHOTO_EN_24978.jpg
Image with caption: "Jim Leech, President & CEO (CNW Group/Ontario Teachers' Pension Plan)". Image available at: http://photos.newswire.ca/images/download/20130402_C9647_PHOTO_EN_24974.jpg
Image with caption: "Neil Petroff, Executive Vice-President of Investments & CIO (CNW Group/Ontario Teachers' Pension Plan)". Image available at: http://photos.newswire.ca/images/download/20130402_C9647_PHOTO_EN_24975.jpg
SOURCE: Ontario Teachers' Pension Plan
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