Message from the Chair and Vice-Chair (continued)

Managing risk

Throughout 2012, the Trustees and OPTrust’s management and staff continued to prioritize the identification, analysis and management of the wide range of risks facing the Plan. Over the year, the Board:
  • Initiated a comprehensive review of OPTrust’s strategic, investment, operational and governance risks. This work will help guide the development and implementation of a new enterprise risk management program, reporting to the CEO, over the coming year.
  • Reviewed actuarial research modeling the impact of demographic and membership changes, long-term mortality improvements, and potential short-term investment losses on the Plan’s funded status. In 2013, the Trustees strengthened the Plan’s mortality assumption and reduced the assumed rate of inflation (and the nominal investment return target) used in our funding valuation as at December 31, 2012. These changes increase the Plan’s liabilities for funding purposes.
  • Adjusted the Plan’s asset mix targets, based on the results of our most recent asset/liability study. These changes reinforce our successful diversification strategy, strengthening our ability to meet the Plan’s 6.25% nominal investment target return over the long term, while reducing investment risk at the total fund level.
  • Monitored the preparation of our 2012 funding valuation, which showed that the Plan remains fully funded, after accounting for the Plan’s $852 million in rate stabilization reserves. These reserves, which the sponsors prudently set aside from past investment gains, are sufficient to pay down the Plan’s current $818 million deficit, at the sponsors’ discretion.