The province of Ontario has five main PPFs, four of which are plans (HOOPP, OMERS, OPTrust and OTPP) and one of which is a manager (IMCO) for two additional plans (OPB, WSIB). Unlike some of the other Canadian funds, all of them stick to calendar years, so it is fairly easy to compare their performance.
The Healthcare of Ontario Pension Plan, aka HOOPP, may be less known than some of the other plans, but last week it confirmed our suspicions by announcing some extraordinary results that put them at the forefront of SOIs not only in Canada but globally. In fact, their 6-year annualized result of 9.41% is the best financial result in Canada and the third around the world, only behind Sweden’s AP-Fonden and NZ Super. Watch out for the infographic on the returns achieved by SWFs and PPFs in our next monthly newsletter.
Furthermore, HOOPP is the most conservative among Ontario funds – with a 29% allocated to alternatives and 42% invested overseas – and yet, it maintains the highest returns and best funding ratio, with 119%. A well-honed strategy in bonds and stocks and a good domestic market knowledge can pay good dividends. It is run with a single office and 700 staff, very modest numbers when compared to OMERS and Teachers.
In fact, OMERS and HOOPP had a very different 2020. The former lost a 2.7%, while the latter returned an 11.4%. Six years ago, OMERS was 21% larger than HOPP – today, they both manage USD 82 billion.
HOOPP’s success is often attributed to active management and a Liability Driven Investing (LDI) approach. The in-house team runs a liability hedge portfolio (bonds and properties) and a return seeking portfolio (credit, equities, Infra, PE and HF). Interestingly, the LHP generated 70% of the investment income in 2020.
The Healthcare plan performed among the best third in our latest GSR Scoreboard assessment with a 76%, has an active ESG team and it was named as a Top Employer in the Greater Toronto Area for 2021.
It is unclear whether HOOPP’s strategy will continue to bear such fruitful results in the years to come and whether the fund will be agile enough to respond to a potential seismic shift in 2021, but we believe that State-Owned Investors from around the world should start looking at its success factors. We definitely have.