Tough Year for OMERS as COVID Wreaked Havoc on Retail and Entertainment

Posted on 02/26/2021

Ontario Municipal Employees Retirement System (OMERS) wrote in its press release, “2020 was dominated by the COVID-19 virus and its impacts across the globe and here in Ontario. Many OMERS members served on the front lines and provided essential services to our communities across Ontario. Many continue to do so. We thank them and are proud to come to work every day for them.

The effects of the global COVID-19 pandemic negatively impacted our portfolio in 2020, particularly our business- and consumer-facing investments, contributing to an investment return net of expenses of -2.7% for the year. Widespread lockdowns in investments that included retail properties, and the transportation and entertainment sectors explain more than half of our shortfall to our benchmark in 2020.”

OMERS had a -2.7% total net return for 2020 vs. 11.9% in 2019. Real estate did the worst at -11.4%, followed by private equity at -8.4%, and credit at -4.3%. OMERS infrasrtucture generated an 8.6% return.

OMERS is allocated heavily to direct real estate through its unit Oxford Properties and private equity. OMERS reported, “Widespread lockdowns severely affected the business- and consumer-facing investments in our portfolio, including our investments in retail properties and in the transportation and entertainment sectors. These lockdowns significantly impacted our returns in real estate and private equity and explain more than half of the overall performance gap; OMERS portfolio of high-quality public equities includes significant allocations to dividend-paying financial services and energy businesses. These sectors lost value in 2020, and did not fully recover during the market rally in the latter part of 2020. The impact of sector allocation in our public equities contributed another 20% to the overall performance gap; We saw significant market stress in March and April. At that time, we took a number of actions proactively to enhance and protect the Plan’s liquidity from the possibility of further adverse market events – including reducing our foreign currency hedging positions to mitigate against the risk of significant cash outflows, had the Canadian dollar continued to weaken. These prudential actions achieved their objectives, though they resulted in currency losses, as the Canadian dollar appreciated after we reduced our hedges. This activity contributed about 20% to the overall performance gap relative to our benchmark. ”

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