February 23, 2009 / 4:17 PM / 9 years ago

UPDATE 3-OMERS pension fund reports C$8 bln loss for 2008

* Total return -15.3 pct vs +8.7 pct (Adds quote, details)

By Jennifer Kwan

TORONTO, Feb 23 (Reuters) - OMERS Administration Corp, one of Canada’s largest pension funds, reported on Monday a loss of more than C$8 billion ($6.4 billion) for 2008, stung by a plunge in global stock markets.

But the fund, which represents about 390,000 retired and working municipal employees in the province of Ontario, said it avoided a much steeper loss because of the performance of its fixed income, real estate and infrastructure assets.

The pension fund reported a negative 15.3 percent total rate of return for 2008, compared with a positive return of 8.7 percent in 2007.

By comparison, the broad Standard & Poor’s 500 index dropped 38.5 percent last year.

OMERS, which manages about C$44 billion in net investment assets, said its net investment loss amounted to C$8.01 billion for the year, compared with a profit of C$3.94 billion in 2007.

The results reflected one of biggest drops in stock markets in decades, OMERS Chief Executive Michael Nobrega said in a statement.

“The financial crisis that devastated world markets in 2008 happens once in a lifetime,” said Nobrega, adding that OMERS did not “escape the downturn” as global equity markets sank 30 to 40 percent.

OMERS — the Ontario Municipal Employees Retirement System — said it avoided “certain high-risk financial products” such as subprime mortgages, collateralized debt obligations and over-leveraged assets, which contributed to the global financial downdraft.

OMERS said it adopted a new asset mix policy in 2003, and it has reduced its exposure to public market investments to about 60 percent from 82 percent.

Going forward, other pension funds may rethink their asset mix and invest more in fixed income and infrastructure assets, said Paul Forestell, leader of the Canadian retirement professional group at the Mercer consulting firm.

“The challenge in 2008 was that pension plans were invested in public equity markets and those markets went down dramatically in 2008, which affected returns for all plans,” he said.

“These pension funds are certainly going to look at how they do business.”

Forestell added plan sponsors will put more cash into their pension plans, and if there is no swift turnaround in markets, sponsors can assume those increased cash contributions will continue.

Earlier this month, the Canada Pension Plan Investment Board said it took a C$7.9 billion hit to its portfolio in its third quarter due to market turbulence.

Another big Canadian pension fund, Caisse de Depot et Placement du Quebec, is expected to report results later this week.

Earlier this month, a Montreal newspaper said the Caisse will report a massive loss for 2008, partly because of falling stock prices and also because of exposure to the frozen asset-backed commercial paper market.

In reporting its results on Monday, OMERS said its average rate of return for the past five years is 6.9 percent. ($1=$1.25 Canadian) (Additional reporting by Scott Anderson; Editing by Frank McGurty)

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