* Net assets rise to record C$129.5 billion
* Pension plan 97 percent funded as shortfall shrinks to
TORONTO, April 2 The Ontario Teachers' Pension
Plan, one of Canada's top investors, said on Tuesday it had a
13.0 percent rate of return on its investments in 2012, bringing
net assets to a record high of C$129.5 billion ($127.4 billion).
The fourth straight year of double-digit returns on the
investment portfolio narrowed Teachers' funding shortfall to
C$5.1 billion from C$9.6 billion in 2011.
The funding gap measures the difference between Teachers'
projected asset growth and the anticipated cost of providing
pensions to the 303,000 active and retired educators in the
Teachers and peers like the Canada Pension Plan Investment
Board and Caisse de dépôt et placement du Québec have been among
the world's most active dealmakers in recent years, with major
bets on real estate, natural resources and infrastructure.
Still, demographic trends mean Teachers' must provide
benefits to an increasing number of retirees while the number of
active educators paying into the plan declines. The average
teacher in the plan draws a pension for 31 years after working
just 26 years.
The pension plan notched up strong returns in equity and
real estate. But lower returns in fixed income and commodities
pulled overall returns lower, Teachers' said in a statement
accompanying its annual report.
"The investment team successfully navigated significant
risks and turmoil in the global economy again in 2012 to earn an
excellent rate of return," Teachers' Chief Executive Officer Jim
Leech said in a statement. "Our 10-year annualized rate of
return is 9.6 percent."
Even with higher contribution rates and lower benefits,
persistent low interest rates and longer retirements kept
Teachers' from closing its funding shortfall.
It abandoned a passive investment strategy, which focused
mainly on Canadian stocks and bonds, in recent years and has put
its money to work in global equity, seeking projects and assets
that promise long-term income and gains.
EQUITIES, REAL ESTATE DRIVE GAINS
The fund's value has nearly doubled since 2002, with 2012
marking the fourth year of recovery since the 2008 financial
crisis lopped 18 percent from its investments.
It said active management had added C$60.5 billion to the
plan's asset size since inception.
In 2012, investment earnings were C$14.7 billion, up from
C$11.7 billion in 2011.
The combined value of public and private equity assets rose
to C$59.5 billion as additional capital was deployed to manage
the asset mix, and investments returned 14.2 percent, Teachers'
Real assets, which comprise real estate, infrastructure and
timber land, rose to C$28.7 billion at the end of 2012 from
C$25.8 billion in 2011, and returned 14.7 percent.
The real estate portfolio, managed by Teachers' Cadillac
Fairview unit, was C$16.9 billion at year end and
returned 19.4 percent. The infrastructure portfolio was C$9.6
billion and returned 8.4 percent. Timber land assets were C$2.2
billion, with a return of 3.4 percent.
Fixed income assets returned 5.1 percent, while investments
in commodities brought a loss of 1.9 percent.