Ontario Teachers' returns sink

Thu Apr 2, 2009 2:27pm EDT
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By Frank Pingue and Jeffrey Hodgson

TORONTO (Reuters) - The Ontario Teachers' Pension Plan, one of Canada's largest investors, said on Thursday it suffered an 18 percent investment loss last year, with equity and other holdings slammed by the global financial crisis.

The organization, which serves 284,000 active and retired Ontario teachers, said the $19 billion investment loss meant it now has a funding shortfall of $2.5 billion.

But it said this is because $19.5 billion in losses have been held back and will be recognized over the next four years in a "smoothing adjustment". It warned that the shortfall will grow unless the investment climate turns "sharply positive."

In a bid to reduce its risk, the highly influential pension fund manager said it has already lowered its target allocations for equities and fixed income.

It has boosted its target exposure to inflation-resistant assets such as real return bonds, property, infrastructure, timberland and commodities.

Ontario Teachers' said its net assets under management fell to $87.4 billion for the year ended December 31, 2008. That compared with net assets of $108.5 billion a year earlier.

It said its 18 percent investment loss compared with an average 18.4 percent loss for large Canadian pension plans in 2008, according to RBC Dexia. But it also noted the return was worse than the 9.6 percent fall in its composite benchmark.

"The fund's 2008 returns largely reflect its exposure to equities, nongovernment fixed-income securities, externally managed hedge funds and real estate - diversity that has traditionally cushioned the fund in a downturn," it said in a statement.   Continued...