Investment highlights

In 2012, OPTrust:

  • Achieved an investment return of 10.1% in 2012, outperforming both the Plan’s 7.2% composite benchmark return and our 6.5% funding target for the year
  • Limited the Fund’s exposure to public equities, substantially reducing overall investment risk while achieving a strong total fund return
  • Continued to implement the Plan’s long-term diversification strategy, increasing real estate, infrastructure and private equity to 31.3% of the Total Fund
  • Completed our most recent asset/liability study, adjusting the Plan’s asset mix targets to meet our liabilities while diversifying investment risk

Investing for the long term

OPTrust’s investment mandate focuses on generating the long-term rate of return needed to fund our members’ and retirees’ earned pension benefits.

To meet this funding obligation, we expect the pension fund to achieve a real average annual return of 4.0% after inflation and investment expenses. Factoring in the Plan’s 2.5% inflation assumption for 2012, our nominal long-term target return for funding purposes was 6.5% for the year.

Our investment policy and strategy are directly linked to OPTrust’s overall mission to deliver on our pension obligations today and for decades into the future. The mandate of our Investment Division is therefore to build a portfolio of assets that will achieve our funding target return over a long time horizon, while avoiding substantial negative returns in the short term.

OPTrust’s asset mix policy, which defines the asset classes we invest in and their respective allocations, reflects this funding obligation. It also represents the starting point for determining both our investment strategy and the level of investment risk we expect to undertake to achieve our objectives.

Over OPTrust’s 18 years of operation, the Plan’s investment portfolio has realized an average gross annual return of 8.6%, exceeding our 7.2% average funding target return for the same period.

Investment Performance
Net Assets Available for Benefits
OPTrust’s diversified investment portfolio achieved a 10.1% return in 2012, outperforming the 7.2% return for our composite benchmark in a year marked by strong returns for the Plan’s public equity, real estate, infrastructure and private equity portfolios. OPTrust’s average return of 8.6% since the Plan’s launch in 1995 exceeds both our benchmark and the Plan’s funding target for the same period.
Portfolio Returns vs. Benchmarks, 2011
Net Assets Available for Benefits
Diversification was critical to OPTrust’s total fund return of 10.1% in 2012. Over the year, double-digit returns from the Plan’s global equity, real estate, infrastructure and private equity portfolios helped offset lower returns from fixed income, real return bonds and a loss of -3.8% from our energy commodities portfolio.