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Newsmakers

Ohio Police & Fire Pension Cuts Assumed Rate of Return to 8%

Fund also terminates $259 million non-US equity mandate, opens manager search.

By Michael Katz

The $15.34 billion Ohio Police & Fire Pension Fund’s (OP&F) board of trustees has lowered the assumed rate of return on its investments to 8% from 8.25%.

The board also approved a recommendation by Wilshire Associates, the fund’s general investment consultant, to restructure the portfolio’s non-US equity asset class. Based on Wilshire’s structure analysis, the fund said Fidelity Asset Management’s $259 million non-US equity small-cap mandate will be terminated.

“The previous non-US equity structure has been in place since 2011, and the entire asset class was reviewed for efficiencies regarding active risk and return objectives,” David Graham, communications manager for OP&F, told CIO. “The new structure boosts expected return and reduces expected risk, while allowing OP&F to reduce its overweight to international small-caps, and move closer to its overall target for the asset class.”

OP&F said it will work with Wilshire Associates to conduct a closed search for an active ACWI ex-US manager to take over a portfolio currently run by Russell as an interim transition assignment. Non-US equity is currently 21.2% of the total portfolio; however, this is well above the fund’s long-term target allocation for non-US equity of 16%.

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In its investment note for October, OP&F said its real estate consultant, Townsend Group, reviewed performance for periods ended June 30, and reported a 2.1% net return for the quarter, and a 12-month net return of 8.1%.

The OP&F board also approved a recommendation to commit up to $50 million to Tennenbaum Direct Lending Fund VIII. OP&F currently invests in Tennenbaum Enhanced Yield Fund. Additionally, the board agreed to expand Wilshire Associates’ current investment consulting services to include private credit consulting. Prior to June, private credit managers were part of OP&F’s high-yield allocation. However, private credit is now a distinct asset class within the portfolio with a 5% asset allocation.

OP&F is a cost-sharing, multiple-employer public employee retirement system, serving approximately 27,000 active members and more than 30,000 retirees and their beneficiaries.

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Home > News > Newsmakers > Canadian Pension Funds Return 0.9% in Q3
Newsmakers

Canadian Pension Funds Return 0.9% in Q3

Energy sector recovery has positive impact on stock market.

By Michael Katz

Canada’s diversified pooled fund managers reported a median return of 0.9% before management fees for the third quarter, easily outperforming the benchmark portfolio of 0.1%, according to a report from human resources, consulting, and technology company Morneau Shepell.

Since the beginning of the year, the median pension fund return was 4.6%, compared to 4.3% for the benchmark portfolio.

“The recovery of the energy sector had a positive impact on the Canadian stock market during the quarter,” said Jean Bergeron, managing partner of Morneau Shepell’s asset management practice.

The report said emerging market equities outperformed other major global indices over the last three quarters. The MSCI Emerging Markets Index returned 7.7% in local currency, the US equity market represented by the S&P 500 Index rose 4.5% in local currency, and the international equity market represented by the MSCI EAFE returned 3.4%.

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Funds reported a median loss of 1.7% on bonds in Q3, which was 0.1% higher than the benchmark, according to the report. During the same period, long-term bonds lost 4.1%, while medium-term bonds lost 1.8%, and short-term bonds fell 0.5%. High-yield bonds returned 2.3%, while real return bonds declined 3%. Since the beginning of 2017, the report said Canadian funds earned a median return of 0.8% on bonds, which was 0.3% higher than the benchmark.

Morneau Shepell said the median return for Canadian equity managers was 3.3% during Q3, which was 0.4% lower than the 3.7% gained by the S&P/TSX Index. During the same period, the S&P/TSX Small Cap Index increased by 2.4%, while the S&P/TSX Completion Index representing mid-cap stocks rose by 2.8%, and the large-cap S&P/TSX 60 Index was up 4%.,

The report covers approximately 320 pooled funds managed by nearly 50 investment management firms that have a market value of more than C$243 billion ($190 billion). The results are based on the returns provided by portfolio managers, ranging from independent investment management firms to insurance companies, trust companies, and financial institutions. The returns are calculated before deduction of management fees.

 

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