A weakened Canadian dollar helped propel Ontario Municipal Employees’ Retirement System to an 8.3-per-cent annual gain on its investments, as tariff threats and a buoyant American economy boosted the relative value of U.S. dollar assets.
OMERS has 53 per cent of its $138-billion of assets in the U.S. and pays pensions in Canadian dollars. About 40 per cent of its investment return last year came from the effects of foreign currency fluctuations, said chief financial and strategy officer Jonathan Simmons, in an interview.
The pension fund manager has made it a deliberate strategy to hold assets in foreign currencies, most notably the U.S. dollar, as one way to diversify its investment holdings. “It was a nice tailwind for us,” Mr. Simmons said.
There could be headwinds coming in 2025, however, as businesses brace for the potential impact from tariffs proposed by U.S. President Donald Trump. The fallout from tariffs could sap economic growth, drive up inflation and cause job losses if his administration follows through with its plans, and that threat has been “a wake-up call in Canada,” OMERS chief executive officer Blake Hutcheson said in an interview.
“Any global investor with a large aperture, including to the U.S., will be affected,” he said. “I would not say that we would be insulated from these tariffs, which is why we’re studying them and it’s an uncertain time.”
Tariffs could put more inflationary pressure on the pensions OMERS pays, Mr. Hutcheson said. And though the pension fund has no material exposure to the auto industry or some other sectors that could be hit hard, it is hard for any major investor to avoid any impact altogether.
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“We have diversified globally for a reason and we think we’re well-positioned to see through this cycle,” he said. “We continue to believe that both nations are better doing more and working more collaboratively than the other way around, and we’re optimistic that that is possible in the months and years ahead.”
OMERS invests on behalf of nearly 640,000 Ontario public-service workers, including nurses, firefighters and police officers. Its assets increased to $138.2-billion at the end of 2024, up from $128.6-billion a year earlier.
The pension fund manager’s 8.3-per-cent annual return in 2024 beat its internal benchmark of 7.5 per cent. Over the past 10 years, OMERS’s average annual gain has been 7.1 per cent.
“I’m very happy with that outcome,” Mr. Hutcheson said.
The plan is now 98-per-cent funded, up from 97 per cent at the end of 2023, and he said he is confident OMERS will reach fully funded status “in the foreseeable future.”
Publicly traded stocks produced the strongest returns of any asset for OMERS last year, gaining 18.8 per cent. Private credit – an increasingly popular investment strategy that makes loans to private companies – also had a strong year, gaining 12.6 per cent.
OMERS now has 12 per cent of its assets invested in private credit. Even as more investors crowd into that market, Mr. Simmons said he expects it can continue to produce strong returns for the pension fund manager.
“When you are an early mover, you have access to product because you have secured the relationships,” he said.
Real estate was the largest drag on OMERS’s returns, with a loss of 4.9 per cent last year. The value of properties OMERS owns declined overall, but as interest rates have fallen, there is cautious optimism that a rebound could be coming. Over all, operating income from commercial real estate properties has been getting stronger.
“We’re quite hopeful that our real estate portfolio, which has been a significant contributor to OMERS’s success, will be back,” Mr. Hutcheson said. “We’ve been hit pretty hard. I’m hopeful it’s behind us.”
OMERS will publish its annual report with more detail about its financial performance on Feb. 28.
