Portfolio Strategies

In alignment with our Total Portfolio approach, we divide our assets into four sub-portfolios, each with a specific purpose, to help us achieve our Member-Driven Investing objectives: the Liability Hedging Portfolio, the Return Seeking Portfolio, the Risk Mitigation Portfolio and the Funding Portfolio.

Liability Hedging Portfolio

The Liability Hedging Portfolio is designed to help manage funded status volatility by mitigating risk associated with changes to the discount rate of the Plan’s pension liabilities. This portfolio is composed of long-term Canadian federal and provincial government bonds. It also serves as the main source of liquidity for the Plan.

Return Seeking Portfolio

The Return Seeking Portfolio is designed to deliver a diversified source of return from riskier assets, helping to keep our Plan fully funded over the long term. This portfolio consists of public and private equity, credit, multi-strategy investments, real estate and infrastructure.

  • Private Equity: Private equity is expected to generate higher returns than public equity over the long term while providing a smoother volatility profile. Our private equity strategy allows us to identify a broad range of investment opportunities and execute upon those that offer the most attractive risk-adjusted returns. We invest directly into private companies, typically alongside partners and indirectly, through private equity funds.
  • Public Equity: Our public equity exposure is designed to complement our private equity strategy by providing additional, liquid and differentiated sources of equity returns. In public equities, we obtain diversified exposure across both developed and emerging markets, through a mix of internally and externally managed strategies.
  • Credit: Credit investments serve as a diversifier to the Total Portfolio given the variety of sub-strategies in the credit space. They have attractive risk-adjusted returns and help generate stable cash flows for the Plan, allowing us to better fulfill our pension obligations. We invest in credit using a combination of external managers and internally managed strategies, across public and less liquid markets.
  • Multi-Strategy Investments: Our multi-strategy investments consist of a wide range of liquid strategies that provide return streams that are differentiated from traditional asset classes. These strategies can be more complex and dynamic in nature, generally increase the resilience of our Total Portfolio.
  • Real Estate: The real estate portfolio is an important diversifier for the Total Portfolio, ideally lowering funded status volatility and providing predictable income to fulfill our pension obligations. Real estate can provide attractive risk-adjusted returns and is also a hedge against inflation over the long term. We invest across real estate equity and credit in both the private and public markets. We primarily invest directly and complement these investments with fund and co-investments.
  • Infrastructure: Infrastructure investments add diversification to the Total Portfolio and act as a partial inflation hedge. They also aim to provide cash flow and the potential for return enhancement through long-term capital growth. Our infrastructure strategy focuses primarily on establishing and deploying capital through platforms, but also investing directly into infrastructure assets and indirectly through infrastructure funds.
  • Commodities: Exposure to commodities can provide protection against inflation shocks and can help construct a more resilient Total Portfolio through different market regimes. Our exposure to commodities is dynamic rather than a traditional buy-and-hold. It is designed to capture the upside when the market cycle is favourable and limit exposure otherwise.
Risk Mitigation Portfolio

The Risk Mitigation Portfolio is designed to enhance pension security by helping to reduce the long-term impact of severe market drawdowns on our funding ratio. It is expected that this portfolio contributes positively to long-term returns by smoothing the volatility of the Total Portfolio. We hold U.S. Treasuries, U.S. dollar, gold and trend-following strategies in this portfolio.

Funding Portfolio

This portfolio manages funding and liquidity reserves needed to implement our Total Portfolio and manage day-to-day liquidity requirements. The use of moderate leverage allows us to access a more diversified set of strategies and achieve a better overall risk-return profile. This portfolio includes exposures such as bond repurchase agreements, implied funding from our derivative positions, money market and liquidity reserves.

 

OPTrust Private Markets

Visit the Private Markets Group

OPTrust's investments in private equity and infrastructure are managed by the Private Markets Group (PMG), an internal team established in 2005

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