The Ontario Teachers’ Pension Plan Board office is shown in Toronto on Tuesday, Sept. 28, 2021.Cole Burston/The Canadian Press
Ontario Teachers’ Pension Plan recorded a 1.9-per-cent gain on investments in 2023 and missed its internal benchmark by a wide margin as losses on real estate and infrastructure assets dragged down returns.
Teachers fell short of the 8.7-per-cent benchmark it uses to measure its own performance. That meant its investment decisions contributed to a loss of $15.8-billion relative to a reference portfolio of assets last year, the pension fund said.
While the portfolio of stocks Teachers owns performed well, gaining 20 per cent on the year against a 20.3-per-cent benchmark, the pension fund said it was underexposed in that category.
At the same time, an environment of high interest rates prompted Teachers to mark down asset values in its real estate portfolio, which lost 5.9 per cent, as well as its infrastructure arm, which lost 2.8 per cent. Both portfolios fell far short of internal benchmarks, which gained 2 per cent and 7.6 per cent respectively.
Teachers also said that “asset-specific events” had a negative impact on some investments.
Other large Canadian pension funds that have reported investment results for 2023 have also suffered similar losses on real estate assets. But infrastructure assets have generally been resilient and continued to generate gains, with many assets promising stable cash flows and protection against inflation.
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Teachers also lost $2.2-billion on foreign currency changes as the U.S. dollar, to which it had a large exposure, depreciated compared to the Canadian dollar.
“While we advanced key strategic areas of focus in 2023, we did not generate investment results to desired levels,” said chief executive officer Jo Taylor, in a statement.
Teachers had positioned its portfolio “for a more challenging economic environment than ultimately transpired,” he said.
Total assets managed by Teachers, which oversee pensions for about 340,000 members in Ontario, including working and retired teachers, were $247.5-billion at the end of 2023. That was roughly unchanged from a year earlier, as investment income and new contributions were offset by benefits paid and administrative expenses.
Over 10 years, Teachers has had an average annual return of 7.2 per cent. The plan was fully funded to start 2024, with a preliminary surplus of $19.1-billion.
The plan’s total investment costs decreased slightly to $1.86-billion, or 75 cents per $100 of assets, from $1.89-billion, or 78 cents per $100 of assets a year earlier. That was mostly because the plan was involved in fewer transactions, such as mergers, while administrative expenses increased modestly.
The private equity portfolio, which accounts for 24 per cent of Teachers’ assets, gained 3.6 per cent last year, against a benchmark of 16.3 per cent.
The credit portfolio performed better, with a 9.1-per-cent gain against a 9.6-per-cent benchmark.
Teachers also made significant changes to its executive ranks last year. In September, the pension fund announced that chief investment officer Ziad Hindo would leave at the end of the year, and appointed co-CIOs to succeed him – Gillian Brown and Stephen McLennan.
It also named a chief strategy officer, Jonathan Hausman, and announced it would move its real estate investing team in-house, from subsidiary Cadillac Fairview Corp., naming Pierre Cherki to lead the new team.
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