OMERS overwhelms with underperformance

OMERS Strategic Investments, the investment entity of the C$47 billion ($45 billion) Ontario Municipal Employees Retirement System (OMERS) focused on co-investment opportunities in private markets, has dramatically underperformed its benchmark for the year.

In 2009, OMERS Strategic Investments returned -1.2 per cent versus the benchmark of 10.7 per cent. Overall the plan returned 10.6 per cent against a benchmark of 12.1 per cent, with OMERS Private equity the main contributor, doubling its benchmark return with 13.9 per cent.

It is early days for OMERS Strategic Investments, which was formed only last year with a specific mandate to secure co-investment relationships with like-minded investors from around the world, and facilitate a move to the fund’s target of about 42 per cent of investments in private markets.

Throughout the year it formed its first long-term strategic partnership with HAS Development Corporation (HASDC) and Airport Development Corporation (ADC) to pursue airport acquisition and operation opportunities, initially in Latin America.

Through its partnerships the aim is the strategic investments operations will also acts as a conduit to provide the other OMERS investment entities with access to global opportunities and top-tier services.

Since 2003 OMERS 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.

Its long-term asset mix is 10 per cent interest-bearing, 5 per cent real return bonds, 42.5 per cent public equity, 10 per cent private equity, 20 per cent infrastructure, and 12.5 per cent real estate.

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.