OMERS to more than double infrastructure investments

Date: Thursday, May 18, 2006
Author: Global Pensions, Damian Clarkson

CANADA - The C$41bn Ontario Municipal Employees’ Retirement System (OMERS) will more than double its allocation to infrastructure in the coming years.

The fund currently has 6% of its portfolio invested in the asset class, but CFO Paul Renaud told Global Pensions that would increase to 15% as part of its growing focus on alternative asset classes.

“We believe it’s a terrific asset class for pension plans,” he said. “We are now looking at three deals in the UK all with consortiums, as well as another one in Canada that I can’t discuss at present.”

Speaking about the financial health of the plan, after it emerged earlier this year OMERS’ actuarial deficit had trebled to $2.8bn, Renaud said the fund was still in a strong position.

On the back of three successive years of double digit returns, Renaud said: “Our projection based on actuarial assumptions is that deficit will grow to just over $3bn next year, then fall to close to 2bn is 2007 and to around 1bn in 2008.

“That’s mainly because of the actuarial accounting for our investment returns over our long term assumption, which is 7% returns. This year we delivered 16%.”

Renaud said OMERS had done “really well”, in the past but recognised the challenge remained to generate strong returns long term.

“The markets are volatile - we are not kidding ourselves - we won’t always be able to duplicate these returns,” he said, and added Canadian pension funds in general had been through a rough period, and suggested they would be more cautious going forward.

“Boards now realise how volatile returns can be. People will now make smarter decisions going forward, so it has been a learning curve.”

By Damian Clarkson