Ontario Teachers’ Pension Plan said equity gains helped offset fixed income and currency losses in the first half of the year, giving the Toronto-based retirement fund manager a 3.8 per cent return for the period.

“We saw strong performance in our private and public equity, innovation and inflation-sensitive asset classes,” Chief Investment Officer Ziad Hindo said Monday. “Gains were partially offset by losses in fixed income and currency.”

The fund manager, which has $228 billion (US$179 billion) in assets, trimmed exposure to debt last year by cutting back on sovereign markets with negative interest rates and reducing exposure to markets such as the U.S., which has seen a significant economic impact from COVID-19. Fixed income accounted for 20 per cent of the portfolio in the first half, up from 16 per cent at the end of December, with bonds representing 15 per cent.

The fund had a 9.3 per cent increase in real estate and infrastructure assets from the end of last year, with the $47 billion in investments accounting for about one-fifth of the portfolio. Inflation sensitive assets accounted for 21 per cent of the portfolio, up from 17 per cent at the end of December, while assets under its innovation portfolio jumped 63 per cent to $5.66 billion. Ontario Teachers’ doesn’t break down gains for its various assets classes in its mid-year results.

“We set up the innovation portfolio to give us exposure to private high-growth, disruptive businesses,” Jo Taylor, the fund’s chief executive officer, said in an interview. “It probably needs to be several billion dollars to actually meet that test, but it is meaningful at the moment because it’s making great returns.”

The innovation portfolio also adds value to the rest of OTPP’s investing activities, he said, by letting managers slowly wade into new markets to learn about them.

“This area should grow more, as we’ll probably allocate more capital to it, and also the growth rate of the portfolio is generally higher than other areas,” Taylor said.

Ontario Teachers’ also added to its infrastructure bets this year, buying stakes in the operator of thermal energy systems Enwave Energy Corporation in Canada, electricity transmission platform Evoltz Participacoes SA in Brazil and electricity distribution system operator Caruna Networks Oy in Finland. Over the weekend, OTPP announced it is buying Spark Infrastructure Group, in partnership with KKR & Co. and Public Sector Pension Investment Board, in a deal that values the Australian energy company at about AUS$5.2 billion (US$3.7 billion).

“We have a really wide, ambitious plant to grow our real assets, maybe not as a direct replacement to fixed income” but as the “closest thing” to it,  Hindo said in an interview. “Real assets like core infrastructure provide stable income, stable cash flows that are indexed to inflation, with a good level of certainty, spread through several geographies,” he said.

The pension fund holds investments in over two dozen currencies across more than 50 countries, but reports results in Canadian dollars. The stronger Canadian dollar had a negative 1.5 per cent impact on the total fund in the first half, subtracting $3.2 billion from the bottom line.

Its annualized net return since its inception in 1990 is 9.6 per cent and the 10-year return was 9.3 per cent, the fund said.