Investment Strategy and Performance
Member-Driven Investing (MDI) Strategy
OPTrust’s mission is paying pensions today, preserving pensions for tomorrow. We are a pension management organization. Our members depend on us to provide secure, predictable income in retirement. As such, how we think about investing and how we manage our plan align with our members’ interests.
We strive to keep the Plan in balance at all times to protect pension certainty. Benefits are on one side, balanced by contributions and investment returns on the other.
To achieve our primary goal of pension certainty, we need to strike the appropriate balance between two objectives:
- Sustainability – Generating sufficient returns to keep the Plan fully funded.
- Stability – Keeping contributions and benefits as stable as possible over time.
However, there are two primary challenges facing these objectives:
- Demographics – Aging membership limits our ability to take on investment risk.
- Low expected returns – Low interest rates and high valuations make earning investment returns more challenging.
In this challenging investment environment, we are committed to protecting our funded status and avoiding undue risk. As such, we continue to execute on our Member-Driven Investing (MDI) strategy.
Despite what seems to be unbridled optimism in equity markets in 2017, we remain cautious due to elevated valuations and less accommodative monetary policy. Equities, like all risky asset classes, are being supported by an abundance of liquidity and cyclical upturn in global growth. As we are late in the economic cycle, the tightening monetary policy environment raises the potential for policy error. We remain concerned that markets will have difficulty absorbing the next significant shock when it does arrive.
We continue to focus on building a resilient portfolio that harvests a diversified set of risk premia in different economic environments. Our goal is to increase pension certainty, not earn outsized returns by taking excessive risk.
Get the big picture
For more information on OPTrust’s strategy and results, see our full 2017 funded status report.