Public market investments include OMERS investments in bonds, and other interest bearing investments, publicly traded and quantitatively managed equities, and other investment strategies. The Plan’s exposure to public markets investments represents approximately $29.5 billion, or 81.6 per cent of Total Fund assets. OMERS long term strategic goal is to reduce the exposure to public market investments to approximately 62.5 per cent over the next two to four years.
Bonds and other Interest Bearing Investments
Bonds and other Interest Bearing Investments consist of federal bonds, provincial bonds, mortgages with a mix of commercial, industrial and multi-residential loans, real return bonds issued by governments, investment grade corporate bonds, private placements, and short-term cash equivalent securities.
Interest bearing investments are a natural fit for a pension plan seeking reliable low-risk returns that offset the more volatile nature of publicly traded equities.
Public Equities
Actively Managed Equity Portfolios
The actively managed Canadian equity portfolio represents investments in approximately 200 publicly traded companies.
OMERS investment professionals are value investors who buy the shares of well-managed, profitable companies that can produce reliable long-term returns. They select, for example, companies that should gain value from synergistic acquisitions or have a competitive advantage in their industry. Within approved asset allocation guidelines, investment professionals can take advantage of short-term trading opportunities to generate added value.
Non-Canadian equity portfolios are invested in the equities of approximately 1,300 companies in the United States, United Kingdom, Europe, the Far East and emerging markets. Participation in various global economies increases portfolio diversification and lowers overall risk.
Non-Canadian equity portfolios are actively managed by 17 investment firms that specialize in regional and national markets.
Quantitative Managed Equity Portfolios
Investment professionals earn enhanced and less volatile returns from market indices by employing actively managed low-risk strategies that include index-based swaps, arbitrage and the anticipation of changes in index composition.
Other Investment Strategies
To better manage risk and enhance returns for the total fund, OMERS employs a number of investment strategies that are designed to improve returns by mitigating uncompensated risks. These include managing exposure to foreign exchange fluctuations and use of derivatives.
Foreign Currency Management
OMERS uses foreign exchange forward contracts to manage its exposure to currencies other than the Canadian dollar, to hedge currency exposure and for active trading to generate returns. OMERS largest foreign currency management strategy hedges 50 per cent of exposure to 13 major currencies, narrowing their volatility relative to the Canadian dollar.
Active Derivative Programs
As part of the OMERS total derivative program, investment professionals manage a dedicated core portfolio which uses derivative contracts to replicate non-Canadian equity index returns. This exposure to non-Canadian equities complements the global equities portfolios managed both internally and by external specialists. OMERS investment professionals also buy and sell equity options to improve the returns and mitigate the risk of actively managed Canadian equity portfolio.
Derivatives are a cost-effective and risk-efficient means of putting to work money allocated for eventual investment in major assets, such as real estate, infrastructure or private equities. Derivatives also enable us to rebalance the total fund asset mix, or the asset mix within a class, on short notice to adjust for market shifts.