OMERS widens its scope to third-party offerings

Michael NobregaThe C$43 billion ($38 billion) Ontario Municipal Employees Retirement System (OMERS) has been granted expanded powers by the Ontario government to provide third-party investment and pension administration services, and is at various stages of discussion with a number of plans to provide investment management services.

Senior vice president, pension services at OMERS, Wendy Forsythe, said the amendments to OMERS’ governing legislation expanded its investment management powers, and its ability to provide a full range of discretionary investment management services to third party pension funds

“We also have the ability to provide admin outsourcing but our current focus is on bringing additional third party assets under management,” she said.

The changes are part of the Ontario government’s 2009 budget Bill 162, which amend the Ontario Municipal Employees Retirement System Act, 2006, and received Royal Assent on June 5.

The changes allow OMERS to establish authorised subsidiaries to provide investment management and pension administration services to smaller pension plans, governments, certain educational institutions and non-profit organisations.

“A few plans have approached us to explore the possibility of OMERS providing investment management services for their pension funds, and we are currently in various stages of discussion with these plans,” she said.

“At the same time, we are receiving positive feedback from other parties interested in understanding more about what we are able to offer.

“The main premise behind our approach to third-party management is to leverage our existing structure and resources and therefore we are not anticipating the need to hire more people at this time.”

The various OMERS investment entities sit under the OMERS Worldwide brand and include OMERS Strategic Investments, OMERS Private Equity, OMERS Capital Markets, Borealis Infrastructure, and Oxford Properties Group.

The pubic markets division, OMERS Capital Markets, internally manages a $32 billion portfolio of bonds, currencies and publicly traded equities in global markets.

President and chief executive of OMERS, Michael Nobrega, said the increased flexibility would allow the fund to access more and better investment opportunities as well as make the Canadian pension industry more competitive on a global level over the long term.

“With our experience, expertise and capacity to manage third-party capital pools, OMERS is well placed to leverage these new opportunities with pension plans and other like-minded investors,” he said.

“As the pension landscape changes, OMERS is confident of being among the winners because of our direct-drive active management model and our history of forging mutually beneficial partnerships.”

OMERS recently created a new investment entity, called OMERS Strategic Investments, with a specific mandate to secure co-investment relationships with like-minded investors from around the world, and facilitate a move to its target of about 42 per cent of investments in private markets.

Since 2003 the plan has reduced its exposure to public market investments from 82.2 per cent to 60.2 per cent at the end of 2008, with a target allocation of 57.5 per cent. In that time the exposure to private market investments has increased from 17.8 per cent to 39.8 per cent.

OMERS also has a plan to actively manage up to 90 per cent of its assets, up from the current level of about 65 per cent, and is in the process of reviewing its asset mix allocations to assess whether any changes should be made.