Total fund performance
We also compare the Fund’s performance to a benchmark portfolio that is a composite of OPTrust’s allocation to various asset classes held by the Plan. Where possible, the performance of this benchmark portfolio mirrors that of widely recognized indexes for each asset class. As a result, it provides a useful point of reference for measuring the added value generated by OPTrust’s active management of the Fund relative to the equivalent passively managed portfolio.
In 2010, OPTrust’s investment portfolio gained a robust 13.9%, substantially outperforming our composite benchmark’s 10.9% gain for the year. Total investment earnings were $1,530 million in 2010, up from $1,348 million in 2009, when the Plan returned 13.6%. The added value generated by active management of the Fund was 2.9% or $363 million dollars in 2010.
OPTrust’s strong performance in 2010 reflected the continuation of a broad-based recovery in global investment markets, following the recession of 2008 and early 2009. As a result, each of OPTrust’s major portfolios achieved double-digit returns in 2010, with public equity, real estate and infrastructure portfolios accounting for more than 90% of the Fund’s outperformance relative to our benchmark portfolio.
OPTrust’s total fund return has more than doubled our 6.75% funding target for the past two years running. Since 1995, the Plan has bettered our benchmark return by an average of 1.1% annually.
Benchmarks used to measure total fund performance
|Canadian equity||S&P TSX Composite|
|Global equity||Weighted composite of:
S&P 500¹, MSCI EAFE¹, MSCI EMF indexes
|Private equity||Private equity composite²|
|Real return bonds||OPTrust real return bond portfolio|
|Real estate||Custom IPD Index|
|Infrastructure||Consumer Price Index + 5%|
|Commodities - energy||S&P/GCSI Energy Index|
|Fixed income||Weighted composite of: DEX Long Bond, Custom Swap Benchmark (Long)|
|Cash and short term investments||DEX 182 Day T-Bill Index|
¹ Benchmark returns for these indexes incorporate a 50% currency hedge to reflect OPTrust's policy of passively hedging 50% of the Total Fund's exposure to developed market currencies.
² The private equity portfolio benchmark reflects the actual return for the first four years of each investment. Thereafter, the portfolio benchmark incorporates the approved custom private equity benchmark (public equity/LIBOR blend + spread) for each investment.
In 2010, OPTrust achieved an investment return of 13.9%, up from 13.6% the previous year. The portfolio has outperformed the Plan’s composite benchmark return in nine of the past 10 years. OPTrust’s average return of 8.7% since the Plan’s inception in 1995 exceeds both our benchmark and the Plan’s funding target for the same period.