The Ontario Municipal Employees Retirement System said Monday it posted a 10.6 per cent rate of return in 2009, boosting its investment income by $4.3-billion.
OMERS, the large public pension plan posted a sharp turnaround last year after losing $8-billion on its investments in 2008, leading to a 15.3 per cent loss for the year.
The fund, which invests pension money for 400,000 employees and retirees of municipal governments in Ontario, said its five-year rate of return now stands at 6.6 per cent.
OMERS is the second major pension plan to report its 2009 results. Last week, the Caisse de dépôt et placement du Québec reported a 10-per-cent return on its investments.
OMERS chief executive officer Michael Nobrega said the fund took a "prudent" approach to investing in equities last year because global markets remained volatile.
"This approach ensured that we retained the flexibility to preserve capital while providing the opportunity to participate in a rebound that occurred in the equity markets later in the year," he said in a statement Monday.
The fund reported its capital markets investments earned a return of 11 per cent last year, up dramatically from a loss of 19.5 per cent in 2008. Private equity holdings and infrastructure also provided strong returns last year, with gains of 13.9 per cent and 10.9 per cent respectively.
However, OMERS posted a return of just 1.3 per cent on its real estate investments managed by its Oxford Properties Group, down from 6 per cent in 2008, and the fund's new "strategic investments" division posted a 1.2-per-cent loss in 2009.
Despite the overall improvement in returns, OMERS said its pension obligations have continued to increase at a greater pace than contributions. The result is that the plan's deficit grew to $1.5-billion as of Dec. 31, up from $279-million a year earlier.
OMERS chief financial officer Patrick Crowley said the fund's $4.95-billion net loss in 2008 will also impact the shortfall over the next four years.
"Enhanced investment returns in 2009 and in subsequent years will be one component in addressing this deficit," he said in a statement.