OMERS Seeks Private Pension Plans; Achieves 12% Return for 2010

(March 1, 2011) — Pension funds such as the Ontario Municipal Employees Retirement System (OMERS) have pushed the federal government to allow more players to administer the new pooled registered pension plans (PRPPs), announced by Canada’s Finance Minister Jim Flaherty late last year.

“Right now, it’s insurance companies and the banks,” Michael Nobrega, chief executive officer of OMERS, told reporters in Toronto on Monday, according to CTV News. “I would suspect that the federal government would be wise to include a broader range of providers other than simply the banks and insurance companies, because the pension funds do have the muscle and investment systems to do it.”

Financial institutions have urged the federal government to allow more players to administer the new pooled registered pension plans (PRPPs) as an alternative to expanding the Canada Pension Plan. The establishment of PRPPs comes as an increasing number of pensions search for additional profit and growth, CTV News reported. “We are seeing millions of dollars coming in,” Jennifer Brown, OMERS’ chief pension officer, told the news service. So far, close to 2,000 people have signed up for the program, she said.

On Monday, OMERS reported that it posted a 12% returns in 2010 as its net assets grew to $53.3 billion, spurred by private-equity holdings. The fund reported an increase in all five of its asset classes. Yet, the pension fund manager’s 2010 funding deficit increased to $4.5 billion from $1.5 billion a year earlier. As OMERS continues to recover from the financial crisis, OMERS chief financial officer Patrick Crowley said in a statement that based on the fund’s asset mix policy and active investment strategy, he believes the fund can generate average returns of 7% to 11% annually over the next five years.

Last week, Canada’s Caisse de Depot et Placement du Quebec reported that it has almost rebounded from a disastrous 2008 performance, with infrastructure and private equity holdings helping the investment giant to outperform its benchmark index by 4.1%. “In a year marked by turbulence, Europe’s sovereign debt crisis and fears of a slowdown in the US, the Caisse generated strong results on many fronts,” said Michael Sabia, the Caisse’s President and Chief Executive Officer, in a release. “Our teams successfully repositioned the Caisse to focus on its core business and select quality holdings, while managing the portfolios prudently to take advantage of hard-to-predict market conditions. Of course, we understand that, ultimately, the most important thing is our long-term performance.”

Following a rebound in global markets, net investment income was $18 billion, up from C$11.8 billion a year earlier. According to a January report by RBC Dexia’s investment services unit, the Caisse surpassed the 10% return of Canadian pension funds last year.

The release by Caisse noted that the fund’s C$17.5 billion private equity unit achieved stellar growth with a 27% return. In December, the fund reported that despite a relatively quiet year in 2010, the private-equity arm of the Caisse planned to add to its team to invest in Quebec companies. The fund said it was planning on boosting staff at its private equity unit by around 25% in 2011 as it pursues its mission to contribute to the economic development of Quebec.

Meanwhile, the C$4.3 billion infrastructure unit returned 25%, while equities, the Caisse’s biggest asset class, returned 15%. US stocks increased 10%, while the Caisse’s emerging-markets equities holdings returned 12%.