Sound investment strategy
Underpinning the pension promise is the need to generate investment returns that equal an average real rate of return (after inflation) of 4.0%, over the long term. In 2010, OPTrust continued the evolution of the Plan’s asset mix to bring it closer to the long-term strategic asset mix targets that were established in 2009. This long-term strategy is intended to reduce overall investment risk and increase our ability to meet the Plan’s long-term funding requirements.
The Plan’s investments generated a strong return of 13.9% in 2010. The total fund return also substantially outperformed its benchmark return of 10.9%. A broad-based recovery in global investment markets, following the recession of 2008 and early 2009, provided the foundation for these results. However, OPTrust’s active management of the Plan’s assets also generated significant added value in each of the Plan’s major portfolios in 2010.
Effective risk management is another critical element of our long-term investment strategy and in 2010 OPTrust launched the first phase of a new enterprise-wide investment risk system. This system improves the ability of OPTrust’s investment division to analyze risks affecting the Plan, enhances risk reporting capabilities and increases the ability to monitor compliance to risk limits. We will continue to examine additional opportunities to effectively mitigate and manage risk for the Plan.