Ontario Teachers’ Pension Reports 1.9% Return for 1H 2023

The C$250 billion pension fund also netted a 4.8% return for the 12-month period that ended June 30.



The board of the Ontario Teachers’ Pension Plan reported a 1.9% return for the first six months of the year and a 4.8% return for the 12 months ending June 30, as the fund’s net assets rose to C$249.77 billion ($185.15 billion) from C$242.50 billion in June 2022. 

“Our investment portfolio is purposely designed to help us achieve stable returns over the long term, and our half-year results demonstrate that our portfolio construction is working as planned,” Jo Taylor, president and CEO of OTPP, said in a release. “Our balanced portfolio positions us well to navigate markets that we anticipate will continue to be volatile in the coming years.”

The pension fund also reported five- and 10-year annualized net returns of 7.0% and 8.6%, respectively, and a 9.4% annualized return since its inception in 1990.

The pension fund’s public equity investments rose to C$23.3 billion as of the end of June, from C$21.9 billion at the start of the year, while the value of its private equity investments increased to C$60.7 billion from C$58.3 billion during the same period. OTPP’s fixed-income holdings increased during the first half of the year to C$118 billion from C$76.2 billion, while its infrastructure and real estate holdings increased to C$42.4 billion and C$29.3 billion, respectively, from C$39.8 billion and C$28.1 billion, respectively.

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“We saw positive returns across multiple asset classes, including public and private equities, infrastructure, and credit over the course of the first six months of 2023,” OTPP CIO Ziad Hindo said in a release. “Looking ahead, we will remain disciplined as we pursue attractive investment opportunities while building value within our high-quality portfolio of companies.”

According to OTPP, as of January 1, the plan was fully funded with a $17.5 billion funding surplus.

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Stock Market Slumps Amid S&P’s Bank Downgrades

Ratings drops affect Comerica and KeyCorp, following Moody’s negative actions on lenders two weeks ago.

The stock market, already trending downward, fell further Tuesday as S&P Global Ratings downgraded the credit ratings of five banks, including two of the biggest U.S. lenders, Comerica and KeyCorp.

The action comes two weeks after Moody’s Investors Service downgraded 10 regional U.S. lenders. That move also spooked the market, which had assumed the banking system’s problems, notably the spring collapse of Silicon Valley Bank and two other small institutions, were over.

Bank stocks were hit the hardest Tuesday, suffering even more than after the Moody’s downgrades. The KBW Bank Index dropped 2.6% (more than the 1.2% it lost two weeks earlier), and the KBW Nasdaq Regional Bank Index fell 2.7%% (compared with the prior 1.4% drop).

The S&P 500 did not suffer as much this time, slipping just 0.28%, versus negative 0.4% two weeks back.

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The banking downgrades come amid the Federal Reserve’s 11 interest rate increases, which have crimped profitability and led to deposit flights from some lenders.

“The sharp rise in interest rates and quantitative tightening deployed since March 2022 to combat high inflation are weighing on many U.S. banks’ funding, liquidity and spread income,” S&P commented in its report. “These factors have also caused the value of banks’ assets to fall and raised the odds of asset quality deterioration.”

The five downgraded banks each were pushed down one notch but remain investment grade, albeit in the lowest category before junk. On Tuesday, their shares slumped between 2% and 4%. The two largest, KeyCorp (No. 20 in the U.S. with $193 billion in assets, per the Fed’s list) and Comerica Inc. (No. 31, $90 billion), now are BBB.

The other three downgraded banks are Valley National Bancorp (No. 37, $61.7 billion, now BBB-), Associated Banc Corp. (No. 49, $41 billion, BBB-) and UMB Financial Corp. (No. 50, $41 billion, BBB+). 

Of the five S&P downgrades, only one also was demoted by Moody’s: Associated.

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