OMERS’ new co-investment entity gateway to private deals

The Ontario Municipal Employees Retirement System (OMERS) has 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.

According to chief executive of the C$43 billion ($34 billion) OMERS, Michael Nobrega, the new entity with offices in Canada and London, is part of an over-arching strategy aimed at getting the fund beyond 100 per cent funding, with 70 per cent of investment returns contributing to funding for the retirement of its more than 390,000 members.

“Through this new entity we will pursue dominant private market assets with stable long-term investment returns that will generate surplus wealth in the years to come once we eliminate our deficit,” Nobrega said.

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.

A couple of years ago OMERS implemented an asset allocation mix that would see the fund invest up to 35 per cent in infrastructure and real estate assets. It established Borealis Infrastructure to access infrastructure investments and consolidated the real estate assets under Oxford Properties.

Part of the mandate of OMERS Strategic Investments is to enhance the current and future capabilities of these investment entities’ and source and close deals more efficiently and effectively.

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.

“We have evidence that active management is a key to producing superior risk adjusted returns,” he said. “Hand in hand with active management we continue to refine and strengthen our already active risk assessment and management systems.”

“We actively manage what we own to attract premium returns from these assets,” he said.

“The economic crisis has shaken us to our core but we are still standing tall thanks to the investment policies and practices implemented over the last five to 10 years and will continue to build on these investment policies and practices and constantly review our asset mix allocations to ensure we create surplus wealth once we eliminate the deficit.”

OMERS is about 90 per cent funded, following a -15.3 per cent return for 2008, only the third year since 1991 it has recorded a negative return.