OMERS 2013 Returns - Private Equity Boosts Returns

Did you know 1 in 20 Ontario employees are members of the Ontario Municipal Employee Retirement System OMERS?  They manage over 65 billion in assets!  Last years' total returns were a bit soft due to the OMERS Capital Markets low rate of return.

A breakdown of OMERS Primary Pension Plan by "Investment Entity" for 2013 and 2012 Gross Returns shows how private equity, infrastructure and real estate investments outperformed the Capital Markets segment and really gave OMERS most of last year' returns:

2013 Rate of Return
2012 Rate of Return
OMERS Capital Markets
0.5%
7.5%
OMERS Private Equity
23.6%
19.2%
Borealis Infrastructure
12.4%
12.7%
Oxford Properties
14.3%
16.9%
OMERS Strategic Investments
9.1%
-10.1%
Total Plan
6.5%
10.0%

As over half of OMERS investments are public market assets (57% in 2013), and earning 0.5% in Capital Markets can barely cover the management expenses.  Private equity in contrast, contributed relatively the most - I calculated 3.3%, or half of the of the overall 6.5% return - despite its small weighting in the portfolio (14% of the portfolio).   

The public capital markets should not affect long term performance - OMERS is moving to a low beta portfolio model that emphasizes steady cash flow and low volatility.  If you apply the same principles to your investment / retirement portfolio, then you can consider some of the private market alternative investments covered in the investing101.ca blog:

Real Estate Investment Trusts (steady returns no market volatility, like OMERS Oxford Properties)
Lending with Syndicated Mortgages (fixed returns and investment secured with real estate)