Public market investments make up the largest proportion of OPTrust’s $13.7 billion investment fund. These investments, which include Canadian and international equities, bonds, other publicly traded securities and cash, accounted for more than 70% of the Plan’s assets at the end of 2011.
OPTrust invests in these securities primarily through external, active investment managers. The Trust’s market exposure is diversified by asset class, geographic region and investment style.
Fixed income investments
The Fund’s allocation to fixed income assets helps generate the income required to fund the Plan’s pension obligations. Fixed income investments include traditional corporate and government bonds and non-marketable Government of Ontario debentures. At December 31, 2011, the Plan's fixed income investments represented 24.6% of the Total Fund.
OPTrust also holds a portfolio of government-issued real return bonds that are linked to the rate of inflation. This portfolio was valued at 10.9% of the total fund at the end of 2011.
OPTrust’s allocation to public equities offers the prospect of capital appreciation, which is necessary for the enhancement of the Trust's value over the long term. At the same time, public equity investments expose the Fund to higher levels of volatility than many other asset types.
While a substantial portion of the Plan’s public equity investments are in Canadian companies, our portfolio is increasingly global in scope, including exposure to companies in emerging markets. At the end of 2011 our Canadian and global equity portfolios accounted for 11.6% and 16.0% of the fund, respectively.
In 2011, OPTrust’s Canadian and global equity portfolios experienced negative returns of -7.3% and -9.1%, but outperformed their market benchmark returns of -8.7% and -9.6%, respectively. These losses, which reflected the impact sharp declines in equity markets in the second half of the year, were offset by returns of 19.5% and 19.4% for OPTrust’s fixed income and real return bond portfolios.
Public Market Investments Group
Our Public Market Investments Group is responsible for carrying out the analysis necessary to structure our public markets portfolios and identify and select our external managers. Once managers are selected, we monitor their investment activity and evaluate their performance on a regular basis.
At the end of 2011, OPTrust employed four external Canadian equity managers, six managers for foreign equity mandates, three fixed income managers, four currency managers and two managers with energy commodity mandates. [OPTrust’s public market investment managers]