OPTrust news: OPTrust Announces Financial Results for 2002Posted: April 4, 2003
Toronto (April 4, 2003) - The OPSEU Pension Trust (OPTrust) today announced its financial results for 2002. In a challenging year for global financial markets, the one-year rate of return for OPTrust's diversified investment portfolio was negative 7.2%.
Despite experiencing its second consecutive annual investment loss, the OPSEU Pension Plan continued to outperform its composite benchmark in 2002, which dropped by 7.8%. The benchmark measures the performance of standard indices for the markets in which OPTrust invests, in proportion to their weighting in the Plan's asset mix.
“Like other large institutional investors, OPTrust's return is closely tied to the performance of the markets in which we invest,” said David Rapaport, Chair of OPTrust's Board of Trustees. “With the global nature of the downturn in stock values last year, we experienced a significant loss on the 60% of the Fund invested in Canadian and foreign equities. These losses were partly offset by strong returns on the Plan's fixed income and inflation sensitive investments.”
Given the nature of its commitment to Plan members and pensioners, OPTrust's ability to grow the fund's assets over the long-term is much more important that single-year returns. Since the Plan's inception in 1995, OPTrust has achieved an average annual return of 8.8%. This return exceeds both the 8.0% average for the benchmark over the same period, and the 7.5% target return required to meet the Plan's funding requirements.
“While we are concerned that equity markets may continue to perform poorly in 2003, we anticipate that the Plan will be able to meet or exceed its funding requirements over the long-term,” said Rapaport. “In the meantime, our members and pensioners have the security of knowing that, as part of a defined benefit pension plan, the value of their earned pensions is not affected by changing investment returns.”
At the end of 2002, the OPSEU Pension Plan's net assets stood at $8.5 billion, down from $9.4 billion in 2001. The decline in net assets reflects both a $688 million investment loss and benefit payments that exceeded contributions by $223 million. The Plan's surplus for financial statement purposes stood at $1.1 billion at December 31, 2002, compared to $1.8 billion the previous year.
In 2002, the OPSEU Pension Plan's actuarial funding valuation for the years 1999-2001 identified net funding gains of $867 million. The gains, which were largely due to the delayed recognition of investment earnings from the late 1990s, were shared between the Plan's members and pensioners and the Government of Ontario.
In its role as one of the Plan's sponsors, OPSEU used part of the members' and pensioners' share of gains to fund a package of temporary and permanent benefit improvements and to extend a modified reduction in members' contributions.
OPSEU also set aside $146 million in a contribution stabilization fund. This fund can be used to offset any required increase in member contributions above the normal rate, should the Plan experience a funding loss in the future.
Part of the Government of Ontario's share of gains was used to eliminate the balance of the Plan's initial unfunded liability owed by the Government and to pay for certain negotiated pension plan improvements. The OPSEU Pension Plan is now fully funded, 27 years ahead of schedule. The Government also established a $297 million fund to stabilize its future contributions.
OPTrust's financial results are presented in its 2002 Annual Report, released this week. The Annual Report, including full financial statements and a list of significant investments, is available in print and on OPTrust's Web site.
OPSEU Pension Trust