Achieved a one-year total-fund net return of 1.9%.
Underperformed benchmark return of 8.7% resulting in negative value add of $15.8 billion.
Delivered a ten-year annualized total-fund net return of 7.6% and return since inception of 9.3%.
Retained a $19.1 billion preliminary funding surplus and is fully funded for the 11th straight year.
Reduced portfolio carbon emissions intensity by 39% compared to 2019 baseline and 10% relative to 2022.
Announced the establishment of an in-house real estate asset class group.
TORONTO, March 12, 2024 /CNW/ – Ontario Teachers’ Pension Plan Board (Ontario Teachers’) today announced a one-year total-fund net return of 1.9% for the year ended December 31, 2023.1 The net-return for 2023 was driven primarily by strong returns from public equities and credit, offset by losses in infrastructure and real estate. Net assets grew to $247.5 billion, reflecting incremental progress toward a strategic goal to reach $300 billion in net assets by 2030. Investment income of $5.5 billion and contributions of $3.3 billion for the year were largely offset by benefits paid of $7.6 billion and administrative expenses of $0.9 billion.
Results reflect underperformance relative to the benchmark return of 8.7% by 6.8%, or $15.8 billion in negative value add2. This compares to a total-fund net return of 4.0% in 2022, which beat the benchmark by 1.8% or $4.4 billion in value add.
The benchmark underperformance was driven by several factors, including a relative underexposure in listed equities which performed strongly through the year as well as valuation adjustments in the infrastructure and real estate portfolios due to higher interest rates and asset-specific events that negatively impacted select investments.
The plan is fully funded as at January 1, 2024, with a $19.1 billion preliminary funding surplus. This marks the plan’s 11th consecutive year being fully funded (meaning plan assets exceed future pension liabilities), underscoring the plan’s long-term financial health and stability.
“While we advanced key strategic areas of focus in 2023, we did not generate investment results to desired levels. This was largely due to positioning the portfolio for a more challenging economic environment than ultimately transpired, our relatively lower exposure to public equities, and valuation adjustments in certain real estate and infrastructure assets,” said Jo Taylor, President & Chief Executive Officer. “With that said, we remain fully funded and delivered a positive return, which are both important financial metrics for our members. As a pension plan with multi-generational liabilities, our investment strategy is intentionally designed for stable long-term returns.”
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1 All figures are as at December 31, 2023, and denominated in Canadian dollars unless noted.
2 Value-add is the amount of return in excess of (below) benchmarks after deducting management fees, transaction costs and administrative costs allocated to the Active programs (includes annual incentives but does not include long-term incentives).
Investment performance
Given the plan’s liabilities stretch decades into the future, results over longer periods is particularly important. Ontario Teachers’ has delivered an annualized total-fund net return of 9.3% since inception in 1990, and five- and 10-year annualized total-fund net returns of 7.2% and 7.6%, respectively.
Time period
One-year
Five-year
10-year
Since inception
Total-fund net return
1.9 %
7.2 %
7.6 %
9.3 %
The table below summarizes Ontario Teachers’ investment returns and related benchmark returns by investment asset class for the current and previous year.
Portfolio Performance by Asset Class (all figures as at December 31)
2023
2022
Fund returns (%)3
Actual
Benchmark
Actual
Benchmark
Equity
Public equity
20.0
20.3
(12.5)
(10.2)
Private equity
3.6
16.3
6.1
(3.9)
Venture growth4
(0.7)
12.8
(12.1)
(12.1)
7.4
17.1
0.1
(5.9)
Fixed income
Bonds
0.6
0.6
(5.9)
(5.9)
Real-rate products
7.3
7.3
7.3
7.3
1.2
1.2
(3.5)
(3.5)
Inflation sensitive
Commodities
(0.5)
(0.5)
19.5
19.5
Natural resources
0.2
3.3
29.6
28.2
Inflation hedge
(3.0)
(3.0)
9.2
9.2
(1.0)
(0.2)
19.2
18.7
Real assets
Real estate
(5.9)
2.0
(3.5)
6.7
Infrastructure
(2.8)
7.6
18.7