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OMERS posts 16.4% return

Fund insider Nobrega tipped to replace departing chief, but may face opposition

REAL ESTATE REPORTER

The Ontario Municipal Employees Retirement Board (OMERS) strove yesterday to keep the spotlight on the plan's strong 16.4-per-cent returns and the work of departing leader Paul Haggis, even as sources indicated that his replacement is waiting in the wings.

Michael Nobrega, head of OMERS infrastructure investments, is favoured as an interim replacement because of his corporate background, sources indicated. Still, his appointment could face some opposition because of his past role in a costly outsourcing deal with the pension plan. That deal is the subject of an lengthy investigation by regulators and a draft report is expected within weeks. It also is the subject of legal action by the union that represents the largest portion of its members, CUPE Ontario.

Mr. Haggis used yesterday's announcement of the fund's financial results to stress that his departure does not signal a change in the investment strategy for OMERS, which manages the pensions assets of 372,000 members.

OMERS will stick to its plans to boost its exposure to private equities, real estate and infrastructure, he said, and is moving toward a target of investing 40 per cent of its assets in operating businesses or illiquid investments.

"These results are sustainable because of the organization, the people, the structure, the focus and the reporting we have," he said.

OMERS, the country's fourth-largest pension plan, said the market value of its assets rose to $47.6-billion from $41.1-billion, thanks to strong returns in the public markets and gains from real estate sales and rising property values.

Earlier this month, OMERS announced that Mr. Haggis was leaving the fund although it had not begun a search for his replacement. His departure follows a clash with the board, sources say.

OMERS' investment income rose to $6.5-billion last year, up from $5.5-billion in 2005. Those results helped to reduce the plan's deficit to $2.4-billion from $2.8-billion.

While OMERS plans to focus on alternative investments, traditional equity holdings accounted for a significant portion of the strong results last year. Income from public markets jumped to $4.87-billion from $4.04-billion because of higher returns on foreign equities, the fund said.

Operating income from its property portfolio fell to $350-million from $392-million, but total investment income from the sector rose to $1.02-billion from $790-million. Income from private equity investments fell to $360-million from $383-million.

Income from infrastructure investments also declined to $388-million from $393-million.

© 2007 The Globe and Mail. All rights reserved.

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