Public market investments make up the largest proportion of OPTrust’s $11 billion investment fund. These investments, which include Canadian and global equities, bonds, other publicly traded securities and cash, accounted for more than 80% of the Plan’s assets at the end of 2008.

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 portfolio’s allocation to fixed income assets helps generate the income required to fund the Plan’s pension obligations.  Fixed income investments include traditional bonds and non-marketable provincial bonds, as well as government-issued bonds that are linked to the rate of inflation. At December 31, 2008, the Plan's fixed income investments represented 35.3% of the Total Fund.

Public equities
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 however, public equity investments expose the Fund to higher levels of volatility risk than many fixed income investments.

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 2008 our Canadian and global equity portfolios accounted for 17.4% and 21.4%of the fund respectively.

In 2008, OPTrust implemented a tactical reallocation of 10% of total fund assets out of public equities and into a short-term money-market portfolio. This measure reduced the overall volatility of the Fund, although it remains high relative to historical levels.

Investment performance
Since 1995, these portfolios have generated average annual returns of 8.9% for fixed income, 9.0% for Canadian equities and 5.3% for global equities. These results exceeded the Plan’s composite benchmark returns for each asset class over the same period.

Given the Plan’s substantial investment in global equities, we hedge 50% of the Fund’s foreign currency exposure arising from these investments, with the exception of our emerging markets investments, to reduce the impact of exchange rate fluctuations on fund performance.

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 2008, OPTrust employed four external Canadian equity managers, seven managers for foreign equity mandates, three fixed income managers and one currency manager. [OPTrust’s external investment managers]

Fund diversification
As part of a multi-year diversification strategy approved by Board of Trustees, OPTrust has been gradually reducing the Plan’s public market holdings to fund increased investments in private equity, infrastructure and real estate. When fully implemented, this strategy will reduce OPTrust’s allocation to public markets to 65% of total plan assets.