The Ontario Municipal Employees Retirement System (OMERS) released mid-year results for the first time in its history, reporting it posted an 8.8-per-cent return in the first six months of 2021, and 18.2 per cent for the 12 months ended in June.
The results were insufficient to quiet a combative union that is calling for an outside review of OMERS’s performance.
The union for Ontario public-sector employees, CUPE Ontario – whose members are participants in the plan – on Friday renewed calls for an outside review of OMERS, saying a pattern of underperformance remains. CUPE issued a study in May comparing OMERS’s long-term returns with those of seven other large Canadian plans.
“Just like a single cold day doesn’t mean temperatures aren’t rising, half a year of investment returns tells us very little about the long-term performance of our pension plan,” Fred Hahn, president of CUPE Ontario, said in a statement.
The mid-year numbers contrast with a 2.7-per-cent loss OMERS posted in 2020, which was below both its benchmark return of 6.9 per cent and the results of other large Canadian public pension plans. Caisse de dépôt et placement du Québec, Ontario Teachers’ Pension Plan and Healthcare of Ontario Pension Plan posted returns in calendar 2020 ranging from 7.7 per cent to 11.4 per cent, while Alberta Investment Management Corp. returned 2.5 per cent.
OMERS didn’t release benchmark information for its half-year returns. OMERS has a blend of stocks, bonds and other investments such as real estate, infrastructure and private equity, so its portfolio isn’t directly comparable with the stock market as a whole. However, the S&P/TSX Composite returned 15.7 per cent in the first half of 2021 and just less than 30 per cent for the 12 months ended June 30.
OMERS chief executive officer Blake Hutcheson said in a statement the six-month results were driven by “strong returns across our asset classes” and that “our diverse portfolio is actively participating in the global economic recovery.”
OMERS said public equities – stocks traded on exchanges – returned 12.8 per cent, while the private-equity division returned 15.8 per cent. Together, the two make up nearly half the OMERS portfolio as of June 30.
Infrastructure returned 4.9 per cent, while real estate returned 8.8 per cent. Those two asset classes make up about one-third of the portfolio.
Bonds and credit investments – together, about 20 per cent of OMERS’s assets – returned 0.2 per cent and 1.2 per cent, respectively.
The net investment income of $9.2-billion brought assets to $114-billion.
CUPE has raised questions about OMERS management before, including a lengthy critique of its expenses after it announced its 2018 results. CUPE Ontario represents 125,000 of the pension’s 289,000 active members.
In a May statement, George Cooke, the chair of the board of directors of OMERS Administration Corp., said: “Following the 2020 results specifically, we undertook a thoughtful look at our investment strategy and past decisions with an open mind. … We are confident in our strong new leadership team and have concluded that our current investment strategy is appropriate. An additional third-party independent review is not warranted.”
Friday, the Police Association of Ontario (PAO), another OMERS labour sponsor, applauded the release of the numbers and expressed support for OMERS’ governance structure. The PAO has a representative on the OMERS Administration Corp. board.
In a statement, PAO President Mark Baxter said “we are confident that this independent board – whose members are nominated by the plan’s primary sponsors, including the PAO – is the proper governance model for OMERS, and is appropriately positioned to determine what, if any, adjustments need to be made to investment personnel and strategies.”
