Ontario’s Minister of Finance Releases the Morneau Report

In the 2012 Budget, the Ontario government announced its intent to establish a framework to pool defined benefit public sector pension plan assets. Subsequently, Bill Morneau was appointed as the special advisor to the Ontario Ministry of Finance regarding this matter. 

On November 16, 2012, Mr. Morneau released his report Facilitating Pooled Asset Management for Ontario’s Public-Sector Institutions (the Morneau Report) setting out numerous recommendations intended to improve efficiencies in the investment management of public sector pension plans. The Morneau Report identifies an opportunity for public sector funds to benefit from the implementation of  a pooled asset management framework intended to (i) reduce duplication and costs, (ii) broaden access to additional asset classes, (iii) enhance risk management practices, and (iv) support more diversified portfolios. The proposed framework would permit institutions to retain fiduciary responsibility and control over asset allocation decisions, create and offer a "family of unitized pooled funds", operate at arm’s length from the Ontario government, and facilitate exceptional fund governance and risk management.

Some of the key recommendations of the Morneau Report include the following:

  • a new investment management corporation, notionally the Ontario Investment Management Corporation ("OIMCo"), should be established;
  • pooled asset management should be only undertaken if it achieves a sufficient scale (estimated to be at least $50 billion);
  • mandatory participation in the pooling framework for (i) public sector institutions with pension funds of less than $40 billion in assets, subject to limited exceptions, (including OP Trust and CAAT), and (ii) certain public sector non-pension funds, including the Ontario Nuclear Funds and the Workplace Safety and Insurance Board investment fund;
  • voluntary participation in the pooling framework for public sector endowment funds, supplemental employee retirement plan funds and defined contribution pension plan funds, each on a "cost-recovery" pricing basis;
  • the inclusion of a statutory indemnity for current fiduciaries with respect to any fiduciary liability that may arise from the transfer of investment management responsibility to the new asset manager;
  • all public sector pension plans may negotiate an agreement with OTPP, OMERS or HOOPP to join one of those plans prior to January 14, 2014 and be excluded from the pooling framework;
  • the total investment costs of individual plans participating in the pooling framework should be frozen during the initial three-year period; and
  • the Ontario government will finance the start-up costs of OIMCo through a $50 million loan.

The Ontario Ministry of Finance is asking affected plans, stakeholders and other  individuals to provide feedback on the Morneau Report. As of the date of publication, no deadline has been announced for providing such feedback.



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