PensionsMarch 1, 2021

OMERS Reports First Annual Loss Since Financial Crisis

Canadian pension attributes 2.7% loss to the effects of pandemic on real estate, transportation, entertainment.

Reported by Michael Katz

Canada’s Ontario Municipal Employees Retirement System (OMERS) reported a 2.7% loss last year, well off its benchmark’s return of 6.9%. It’s the first time the pension fund has seen a loss since the financial crisis of 2008.

As a result, the fund’s total net assets declined to C$105 billion ($82.4 billion) from C$109 billion. The fund also reported three-, five-, 10-, and 20-year annualized returns of 3.7%, 6.5%, 6.7%, and 6.0%, respectively.

“We are a long-term investor that pays pensions over decades, and with a strong team and strategy in place, this single year will not define us,” OMERS President and CEO Blake Hutcheson said in a statement.

The pension fund attributed its first loss in 12 years to the effects of the COVID-19 pandemic on its investments in retail properties, as well as in the transportation and entertainment sectors, which accounted for more than half of OMERS’ underperformance compared with its benchmark.

Real estate was the fund’s worst-performing asset class, losing 11.4% during the year, compared with an 8.3% return the previous year, followed by private equity and credit, which lost 8.4% and 4.3%, respectively, after returning 4.6% and 8.0%, respectively, in 2019. Infrastructure was the portfolio’s top-performing asset class, returning 8.6%, compared with 8.7% the previous year, followed by public equity and bonds, which earned 1.5% and 1.1%, respectively, down from 20.3% and 3.6%, respectively, in 2019.

As of Dec. 31, the fund’s asset allocation was 31% in public equity, 20% in infrastructure, 17% in credit, 14% in private equity, 14% in real estate, 6% in bonds, and negative 2% in short-term instruments. And, as of the end of 2020, OMERS’ funded status was 97% when calculated on a smoothed basis, which is unchanged from 2019, and 93% on a fair value basis, down from 101% in 2019.

“As we look to the future, we are making key decisions within our investment portfolio that enhance diversification, growing our exposure in new economy stocks, high-demand sectors in real estate, profitable investments with lower carbon intensity and more,” the fund said. “These changes will help to position the plan strongly to capitalize on the opportunities before us and to deliver on our commitments to members.”