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Illiquid Strategies

Illiquid strategies include real estate, infrastructure and private equity.

Real Estate

Real estate provides predictable income and attractive risk-adjusted returns, helping to fund the Plan’s pension obligations and lowering funded status volatility. Real estate is also an important diversifier and a hedge against inflation over the long term.

Real estate markets were characterized by strong fundamentals and ample access to capital in 2018, but the cycle is maturing and expected returns have moderated. Against this backdrop, we focused on building portfolio resilience throughout the market cycle.

2018 was a very active year, with the Real Estate Group committing to 10 new investments totaling $435 million. All new investments were sourced through existing partners, reflecting our ability to access compelling investment opportunities through our network of trusted partner relationships. New commitments were partially offset by $258 million of selective realizations. The real estate portfolio generated a net return of 7.6% in 2018.

Infrastructure

Infrastructure investments add diversification and act as a partial inflation hedge for the Total Fund. They also provide cash flow and the potential for return enhancement through long-term capital growth.

Asset valuations remained elevated in 2018, but we were able to find value in smaller scale opportunities and established platforms. We committed to six new transactions in 2018 totaling $569 million, reflecting the value of our flexible and partner-driven approach in a challenging market. The infrastructure portfolio generated a net return of 9.9% in 2018.

Private Equity

Private equity is expected to generate higher returns than public equity over the long term while providing a smoother volatility profile.

The overall private equity market remained competitive during 2018, supporting readily-available, low-cost leverage and high valuations. Our private equity strategy, which currently includes modest positions in private credit, long-term equities and significant positions in buyout investments, allows us to identify a broad range of investment opportunities and execute upon those which offer the most attractive risk-adjusted returns.

In 2018, we had a very active year, committing to 10 new investments totaling $434 million and funding ongoing growth and expansion initiatives in various portfolio companies. We were able to capitalize on strong market conditions by selling our equity stakes in certain portfolio companies that had achieved their value-creation plans while retaining minority positions, where practicable, to continue to participate in future growth potential. The private equity portfolio generated a net return of 15.7% for the year.

OPTrust Private Markets

Visit the Private Markets Group

OPTrust's investments in private equity and infrastructure are managed by the Private Markets Group (PMG), an internal team established in 2005

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