At the end of 2011, the OMERS Fund asset mix was 58% in public markets, including publicly traded stocks and bonds, and 42% in private markets, such as private equity, infrastructure and real estate. The current asset mix strategy is to reduce our exposure to public market investments to 53%, while increasing our private market holdings to 47% of net investment assets. This asset mix strategy is based on the belief that over the long term, an asset mix with greater exposure to private market investments is better positioned to generate strong, predictable returns and consistent cash flow with reduced risk.
OMERS is one of the largest pension plans in Canada and a participant on the world investment scene. With AVCs, you're investing in the OMERS Fund. OMERS investment objective is to earn a long-term average rate of return consistent with a moderate level of risk by investing in a portfolio of public and private equities, infrastructure, real estate and a broad range of interest bearing instruments. Returns on investments will fluctuate with economic conditions in Canada and globally, individual company and industry performance, political and world events, changes in interest rates and other factors. An AVC account will be attractive to members who do not want to make their own asset allocation decisions and are seeking satisfactory long-term growth with moderate volatility, through diversification of asset classes. Members should be aware that there are other savings and investment products in the market place with different risk-versus-return profiles (e.g., GICs, exchange-traded funds (ETFs) and mutual funds).
2011
3 Year*
8 Year*
10 Year*
RATE OF RETURN
3.17%
8.51%
7.48%
6.43%
*Average annual rate of return
The seven-year average annual rate of return is presented because it has been seven years since OMERS adopted a policy of shifting our asset mix more heavily into private investments.
In addition to an asset mix policy that will see the percentage of OMERS private market holdings increase, the OMERS Enterprise-wide Strategic Plan calls for more active management, greater global diversification and pursuing opportunities to improve access to capital.
The strategy is to enhance investment returns, reduce costs and better manage risks by implementing an enterprise-wide “direct drive” active management strategy that will increase the level of direct active management of investments. The goal of the OMERS Fund is to have 90% of assets directly managed by 2015. As at December 31, 2011, total Fund assets managed internally were 83.8% as compared with 85.6% at the end of 2010. The decrease is due to a temporary shifting of funds to an external manager as part of a tactical decision to mitigate portfolio risk in capital market investments.
The OMERS Fund will further diversify its asset base globally, reducing exposure to the relatively small Canadian market and securing attractive risk-adjusted returns in areas experiencing sustainable economic growth. The strategy is to continue to look at global investments in private equity, infrastructure and real estate. In addition, OMERS has strengthened its capability to invest in public markets outside of Canada.
OMERS is developing strategies to organize long-term access to capital. This will enable the Fund to acquire larger value investments that generally provide superior returns. OMERS will offer investment management services through OMERS Investment Management to a wide range of eligible clients in and outside Canada, including public and private sector pension funds; governments and their agencies; colleges, universities and their endowments; and registered charities. We are also working to access foreign capital through our proposed global strategic investment alliance which will seek to bring together large pools of capital from other large international funds to initiate, acquire and manage large-scale real estate and infrastructure assets.
OMERS is establishing its global footprint under the OMERS Worldwide brand to showcase the capabilities, accomplishments and talents of the investment entities that are specialists in public and private market investing.
Prior to registering for AVCs and making a contribution or lump-sum transfer to an AVC account, members should evaluate their financial goals and objectives and consider the potential risks of investing in the OMERS Fund through an AVC account. Members should also consider discussing risks with an appropriately qualified financial advisor. These include:
Funds that you contribute or transfer to an AVC account will experience the same variability of returns as the OMERS Fund. OMERS invests in a combination of public and private equities, infrastructure, real estate and a broad range of interest bearing instruments all of which are subject to market and credit risk. While OMERS investment strategy diversifies the investment portfolio, the Fund is exposed to various risks that may negatively impact the value of the Fund and your AVC account over time. Such risks are monitored and managed through OMERS Enterprise Risk Management (ERM) Program and risk management processes as described in the OMERS 2011 Annual Report. The ERM Program is a framework through which OMERS identifies, measures, assesses and manages investment (e.g., market risk), operational (e.g., key person risk), legal and compliance (e.g., regulatory risk) and strategic (e.g., funding risk) risks. Members should ensure that the variability of returns on AVCs, which would be suitable for those willing to accept a moderate risk level, is aligned with their financial goals and objectives.
If you choose to make contributions or lump-sum transfers to an AVC account, you should be aware of the limitations on the timing of withdrawals and the amounts that may be withdrawn from your account. These limitations reduce the liquidity of your investment and should be considered for investment planning purposes. Fees and expenses are based on cost recovery. The administration fee is reviewed on a periodic basis and may change over time. Investment management expenses may vary from year to year.
The OMERS Fund real estate assets include a 50% ownership interest in the YorkdaleShopping Centre, Square One Centre and the Scarborough Town Centre. When you contribute to an AVC account, you're investing in the OMERS Fund.