A soaring Canadian dollar, volatile equity markets and low interest rates combined to create a challenging investment climate during 2007. Nevertheless, HOOPP continued to generate value-added returns – outperforming its investment benchmark for the 10th straight year.

Overall, the Fund’s total return was 6.23 per cent. While this figure is down from the double-digit returns of 2006 and 2005, it would have been much lower if not for prudent investment strategies that enabled us to:

• avoid turmoil related to the collapse of the sub-prime mortgage market and direct exposure to asset-backed commercial paper (ABCP) investments, and
• minimize currency exchange losses through the use of derivative strategies.

While the Fund outpaced its investment benchmark by 145 basis points, it fell short of the  nominal long-term return target of the Plan by 52 basis points.

On the heels of a stellar performance of 2006, the Fund’s real estate and private equity portfolios continued to produce strong results in 2007. Real estate was the top performing asset class, generating a return of 22.65 per cent. The private equity portfolio  returned 17.49 per cent return, despite the negative currency exchange impacts from foreign investments valued in foreign currencies.

What would otherwise have been a good year for the Fund’s public equity portfolios was dampened by the strong Canadian dollar. Positive returns in non-North American markets were negative in Canadian dollar terms.

Fixed income performance exceeded value-added targets. Absolute returns in the fixed income markets were modest in 2007, however the active management and strategies employed by HOOPP’s derivatives and fixed-income groups added significantly to portfolio returns.