The Healthcare of Ontario Pension Plan, long a top performer among Canada’s big pension plans, swung to a loss in 2022, its first in 14 years.
HOOPP said Friday it posted a loss of 8.60 per cent on its investment portfolio, cutting its assets to $103.7-billion at year end.
The plan, which serves 435,000 active and retired Ontario health care workers at more than 630 employers, dipped to its lowest level of funding since 2014 – but that funding ratio, which compares its assets with the future benefits it owes members, still stood at 117 per cent, down from 120 per cent at the end of 2021.
In an interview, chief investment officer Michael Wissell said the annual loss, HOOPP’s first since the financial crisis in 2008, was “disappointing” – but unsurprising for a pension plan with its asset mix.
“We have, broadly, a more decent allocation to public stocks and bonds. And when you look at 2022, the area that did the most poorly was public stocks and bonds. So in the near term, that’s given us our first negative return since 2008.”
HOOPP targets having about 40 per cent of its portfolio in bonds and about 25 per cent in public equities, according to its investment policies. It closed 2022 with about 54 per cent in bonds and 13 per cent in public equities.
Its fixed-income, or bond, portfolio lost 17.80 per cent in 2022, and its public equities lost 12.49 per cent.
In contrast, its credit portfolio – specialized lending to businesses – gained 0.95 per cent. Real estate gained 4.01 per cent, and infrastructure returned 9.43 per cent.
Private equity gained 11.04 per cent, buoyed by a number of profitable exits in HOOPP holdings, particularly Edmonton-based Champion Petfoods LP, which HOOPP and its co-owners sold to Mars Petcare US Inc. last year for an undisclosed price.
Mr. Wissell said that despite the overall loss, HOOPP beat its benchmark – what a similar portfolio should have been expected to return – by 4.61 percentage points. And each investment department outperformed its benchmark, “across the board,” he said.
HOOPP’s 10-year annualized return as of the end of 2022 was 8.35 per cent.
“What we say here is, we’re in the pension delivery business. We’re not in the money-management business, so against that backdrop, we’re pleased that we remain fully funded,” Mr. Wissell said.
Compared with its larger Canadian peers, HOOPP has been late to move into private asset classes such as infrastructure, real estate and private equity. HOOPP targets just about 20 per cent of its portfolio to those categories, and closed 2022 with 23 per cent. That asset mix contributed to its lagging performance versus the other members of the “Maple Eight” big Canadian plans with a calendar-year fiscal period.
The Ontario Municipal Employees Retirement System, with $124-billion in assets, reported a gain of 4.2 per cent. Ontario Teachers’ Pension Plan, with $247-billion in assets, reported a 4-per-cent return for 2022. Caisse de dépôt et placement du Québec, with $402-billion in assets, posted a 5.6-per-cent loss. Alberta Investment Management Corp. is expected to release results later this spring.
On average, Canadian defined benefit pension plans performed much worse, with an average annual loss of 10.3 per cent, as measured by a typical mix of publicly held stocks and bonds tracked by Royal Bank of Canada’s RBC I&TS All Plan Universe.
“We have been steadily, here at HOOPP, growing our private assets,” Mr. Wissell said. “We have this very tenacious focus on liquidity, but that doesn’t mean that we don’t have some capacity to own private assets. We only recently got going in the infrastructure area, and it continues to grow.”