…as management costs creep up on OMERS

NOBREGA_Michael_webThe $48.4 billion OMERS, which plans to have 90 per cent of assets directly managed by 2012, increased its investment management expenses in 2009 by 8 per cent, a figure it claims is offset by lower investment operating and third-party manager expenses.

Investment management expenses were $246 million in 2009, compared with $227 million in 2008, with the majority of the increase due to salary expenses.

Of the total investment management expenses for the year, $100 million were in salaries, which was significantly more than in 2008 when $76 million was spent on salaries.

Travel and communication was also up, from $7 million to $9 million, and system development and other purchased services increased from $11 million to $14 million in the year.

Investment operating and manager expenses decreased from $114 to $110 million over the year.

At the end of 2009 about 80 per cent of assets were managed directly, compared with about 70 per cent at the end of 2008.

The fund is also plans to enhance investment returns and better manage risks by implementing an enterprise-wide “direct drive” active management strategy which will increase the level of direct active management of investments.

According to OMERS’ annual report, the board believes that active asset management produces superior risk-adjusted returns compared with passive investing, and this includes originating investments through proprietary research.

This was seen in a number of ways across the OMERS businesses, including OMERS Capital Markets repatriating more than $2 billion from external managers in 2009, to establish an internally managed global equity portfolio and tactical portfolio to provide asset mix flexibility and substantially increase the debt of its investment research team.

OMERS has a long-term asset allocation weighted 53 per cent to public market investments and 47 per cent to private market investments and, at the end of 2009 private market investments represented about 39.1 per cent, compared with 39.8 per cent in 2008.

At the end of December the fund had 60.9 per cent in public markets, 10.2 per cent in private equity, 15.7 per cent in infrastructure and 13.2 per cent in real estate.