Ontario Municipal Employees Retirement System, one of Canada’s largest pension funds, cut its stock holdings in the nick of time, as economic growth concerns heightened amid a deathly virus outbreak.
While generating returns from its public equity investments of about 20.3 per cent from the prior year, the firm cut its share of stocks to 29 per cent of its portfolio in 2019, from 33 per cent the year before, according to a statement released Monday. Total public investments returned 16.4 per cent in 2019 — its largest returns last year — after losing 4.6 per cent the year before. Private investments gained 11.9 per cent, following a 2.3-per-cent advance in 2018.
The fund may have reduced its investments in stocks in the nick of time as markets globally were rocked as authorities struggled to keep the coronavirus from spreading more widely outside of China. Finance chiefs and central bankers from the largest economies warned this weekend that they saw the virus bringing downside risks to global growth.
“All asset classes generated positive returns, led by public equities,” Omers Chief Executive Officer Michael Latimer said in the statement. “Over the past five years, we have earned $9.8 billion of net investment income over the amount required to fund our pension obligations.”
Omers returned 11.9 per cent on its investments last year, pushing assets under management to $109 billion. It also increased its exposure to infrastructure slightly, while decreasing its real state and private equity holdings moderately.
The fund reduced its government bonds and inflation-linked bond holdings by half during the year to three per cent and two per cent respectively. It cut its public credit exposure to 19 per cent from 17 per cent a year ago. The fixed income portfolio returned 6.7 per cent in 2019 versus 1.8 per cent the year before.
Omers plans to grow to $200 billion of assets under management over the next seven to 10 years, Blake Hutcheson — who takes over as CEO of the fund in June when Latimer retires — said last month, adding that owning, buying and scaling companies gave the firm a “tremendous competitive advantage.”
Omers’ 2019 results trailed the average 14-per-cent increase of Canadian defined pension plans, as estimated by RBC Investor Services. Last week, Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund, said it returned 10 per cent on its investments last year. Its assets under management grew to $340.1 billion from $309.5 billion a year ago.
Founded in 1962, Omers oversees the retirement savings for nearly 500,000 municipal employees, school board, emergency services and local agency members across the province of Ontario.