HOOPP's strategy leads to robust growth, supporting Ontario healthcare workers' pensions
The Healthcare of Ontario Pension Plan (HOOPP) announced a return of 9.38 percent for the year 2023, increasing its net assets to $112.6bn from $103.7bn at the end of 2022.
This performance secures the Plan's funded status at 115 percent, demonstrating its robust financial health by having $1.15 in assets for every dollar owed in pensions.
Despite the slight slowdown from 2022's growth, HOOPP achieved strong returns across multiple asset classes including fixed income, public equities, private equity, and private credit.
The investment team strategically increased exposure to bonds following a rise in yields during the summer and fall, contributing significantly to the Plan's performance as the bond and stock markets rallied towards the end of the year.
“In 2023, there was considerable economic uncertainty resulting from several factors, including increased geopolitical tension, persistent inflationary pressures, and unsteady global growth,” said Jeff Wendling, president, and CEO of HOOPP. “Amidst this volatility, HOOPP delivered strong returns in support of our pension promise to the healthcare workers of Ontario.”
The Plan capitalized on market volatility by enhancing its investment in real return bonds at attractive valuations, which protected the Fund against inflation and generated value for the Plan.
By the end of the year, inflation-indexed bonds constituted roughly half of HOOPP’s targeted portfolio allocation to bonds, facilitating the provision of a cost-of-living adjustment to retired members in 2024.
A significant contributor to the strong 2023 return was HOOPP's substantial investment in Canada, with over $60bn of its assets within the country. This investment spans real estate, including major industrial and logistics parks, office towers, and housing, as well as supporting Canadian innovation and entrepreneurship.
Additionally, HOOPP stands as one of the largest investors in Canadian bonds, which make up about half of the Canadian portfolio. The proceeds from government bond sales contribute to public services and infrastructure essential to Canadians, such as hospitals, public transportation, and schools.
“Our commitment to investing in Canada is strong. Canada is not only our home but also a safe and stable country that offers attractive investment opportunities,” stated Michael Wissell, Chief Investment Officer at HOOPP.
He further explained that the bond portfolio is central to HOOPP’s Liability Driven Investing (LDI) strategy, mitigating the Plan's liability sensitivity to interest rate and inflation changes, providing government-guaranteed returns, supporting other investment activities, and diversifying the Fund's assets.
HOOPP also highlighted its initiatives in 2023, including reinforcing its commitment to sustainable investing with the launch of a climate change strategy aimed at achieving net-zero portfolio emissions by 2050.
Additionally, the Plan continued its research to improve retirement security outcomes for Canadians and expanded its contribution to Ontario's healthcare sector by increasing its employer and member base.
Reflecting on the year's achievements, Wendling expressed pride in the team's accomplishments and reiterated the Plan's dedication to fulfilling its pension promise to Ontario's healthcare workers, emphasizing the Plan's continued strong funded status to ensure pension security.
The 2023 performance by asset class revealed diverse returns, with public equities and private equity showing significant gains, while real estate recorded a decline.
