Private equity boosts OMERS' 2009 results

The Canadian pension reported above-benchmark returns for its investments in private equity and infrastructure last year, with 13.9% and 10.9% respectively.

Private equity was the star in the Ontario Municipal Employees' Retirement System's financial results in 2009, generating a 13.9 percent rate of return, beating out all other asset classes for the year.

The performance of our private equity and infrastructure investments also provided very strong returns, reinforcing our decision to continue to expand our holdings in the private market asset classes.

Michael Nobrega

The positive return was a significant reversal from the pension's private equity portfolio performance in 2008, when it produced a -13.7 percent return.

Infrastructure also performend well, generating a 10.9 percent rate of return, though its performance was down slightly from 2008, when it produced a return rate of 11.5 percent. OMERS' investments in real estate struggled last year, scoring a 1.3 percent return rate, compared to 6 percent in 2008.

“The performance of our private equity and infrastructure investments also provided very strong returns, reinforcing our decision to continue to expand our holdings in the private market asset classes,” Michael Nobrega, president and chief executive officer of OMERS, said in a statement.

The pension had a total 10.6 percent return in 2009, a major turnaround from the -15.3 percent loss it suffered in 2008.

OMERS’ Strategic Investments, which targets global co-investment opportunities across real estate, infrastructure and private equity, was the only portfolio to deliver negative news for the pension, returning -1.2 percent against a targeted return of 10.7 percent.

The pension is now valued at C$47.7 billion (€34 billion; $46 billion) compared to C$43.4 billion as at the end of 2008. However, Nobrega said the plan’s deficit had increased to C$1.5 billion owing to changes in certain actuarial assumptions making “enhanced investment returns in 2009 and in subsequent years” an important factor in trying to address the deficit going forward.

OMERS has been moving away from committing funds to external private equity managers and more into direct investing. The pension opened offices in New York and London to boost its efforts at direct investing. The pension's goal is to have 80 percent of the private equity portfolio in direct investments, and 20 percent in external fund managers. Through last year, the portfolio was split up 65 percent in external fund commitments and 35 percent direct investments.

The pension had about $4 billion invested in private equity through 2009, according to Paul Renaud, president and chief executive officer of OMERS Private Equity. The pension's target allocation to the asset class is 10 percent and its actual allocation is 8 percent.

“OMERS very much believes in active management in terms of adding value to the investment process more so than passive management,” Renaud told PEO in an interview last year. “We have the size, scale and resources we've been building up over time to build up a direct [investment] programme.”

Zoe Hughes contributed to this report.

 

2009

2008

Rate of return

Benchmark

Rate of return

Benchmark

OMERS Capital Markets              

11%

13.5%

-19.5%

-19.5%

OMERS Private Equity               

13.9%

6.7%

-13.7%

13.5%

Borealis Infrastructure             

10.9%

9%

11.5%

9.8%

Oxford Properties                   

1.3%

6.7%

6%

8.3%

OMERS Strategic Investments        

-1.2%

10.7%

n/a

n/a

Total Plan                         

10.6%

12.1%

minus 15.3%

13.2%