Ontario Teachers' returns rebound in 2009

Tue Apr 6, 2010 1:43pm EDT
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TORONTO (Reuters) - The Ontario Teachers' Pension Plan, one of Canada's top investors, said on Tuesday the value of its investments bounced back in 2009 after major losses a year earlier, but not enough to stave off a funding shortfall.

Teachers', which administers the pensions of 289,000 active and retired educators in Ontario, said it had an annual rate of return of 13 percent last year as confidence returned to financial markets, and reported C$10.9 billion ($10.8 billion) in investment earnings.

The fund's net assets were C$96.4 billion as of December 31.

"We spent 2009 taking care of the business of the plan during the tail end of the financial market crash, while taking advantage of the market turmoil to make some investments that are already starting to pay off, and fortifying the plan for the future," said Chief Executive Jim Leech.

But that was not enough to stop the plan from slipping into a funding shortfall of C$17.1 billion, meaning that in the long term it would not be all to pay full benefits to pension plan members unless the deficit is made up.

In 2008, Teachers', Canada's largest single-profession pension plan, suffered an 18 percent investment loss as equity and other holdings were slammed by the global financial crisis.

At yearend 2009, the fund's inflation-sensitive asset class holdings rose to C$45.9 billion from C$44.9 billion at the end of 2008. The equities portfolio climbed to C$41.2 billion from C$34.9 billion a year earlier. Fixed income assets, net of related liabilities, rose to C$6.4 billion at 2009 yearend from C$5.3 billion in 2008.

Leech said the rebound last year came as confidence returned to markets but added that it did not reflect true economic growth.

"We should not expect this kind of market growth going forward," he warned. "In 2008 and continuing into the first quarter of 2009 we saw a crisis of confidence among investors. It caused market mayhem. After the markets bottomed out in March 2009, confidence edged back up and with that came a return to more reasonable valuations. We expect it will still be some time until true economic growth takes hold."   Continued...