Message from the President and CEO (continued)

A record of achievement

In 2012, for example, professionals in our actuarial and investment research and risk groups worked together to carry out a major asset/liability study. This involved modeling the expected performance of a number of possible asset allocations and comparing the results to the anticipated growth in the Plan’s pension obligations, under a wide range of economic scenarios. The result was a set of recommended adjustments to the Plan’s long-term diversification strategy, which were reviewed and adopted by OPTrust’s Board. Together, these changes will further strengthen our ability to meet the Plan’s return objective, while reducing the Fund’s overall investment risk.

Meanwhile, the Fund achieved a robust investment return of 10.1% for 2012, outperforming both the 7.2% return for our composite benchmark and our 6.5% funding target return for the year. Since 1995, the Fund has generated an average annual return of 8.6%, bettering both our benchmark and our funding target over the same period.

In 2012, OPTrust staff continued to support ongoing discussions between OPSEU and the Government of Ontario about the Plan’s funding outlook, the significant economic, demographic and investment risks it faces, and options for reinforcing its long-term sustainability. In October 2012, the sponsors announced a five-year agreement that caps member and employer contribution rates at current levels. The framework agreement also requires any funding deficit to be made up by reducing the benefits that active members will accrue for their future service. We are now reviewing the impact of these changes on the Plan’s funding outlook and our policy outlining recommended options for managing any funding shortfall.

We are also assisting the sponsors as they review options for maintaining and expanding the Plan’s active membership in the face of ongoing restructuring in the Ontario Public Service (OPS). This includes an agreement signed by the sponsors in early 2013 that will permit eligible groups of employees who are divested from the OPS to continue contributing to the Plan. The agreement will also allow new employee groups in the broader public sector to join the Plan, subject to the approval of the Minister of Finance and OPTrust’s Board.