2025 Investments Review

HEPP Investment Returns*

The Healthcare Employees’ Pension Plan’s (HEPP) investments returned 12.0% in 2025, following a 16.1% in 2024. After outperforming our benchmark in 2024 by 1.5%, we underperformed the benchmark return of 13.0% by 1.0% in 2025. The investment environment was challenging last year with regard to benchmark outperformance, as certain sectors had massively outsized returns. One example of this was the materials sector in the Canadian stock market, which was up 100% in 2025. Despite this one-year underperformance, our five and ten year returns of 8.6% and 8.1% exceeded our benchmark returns of 8.3% and 7.8%, respectively. Our Canadian, International, US, and Global equity portfolios returned 26.2%, 29.9%, 7.6%, and 9.7%, respectively. Our other asset class returns were -2.4% in real estate, 3.7% in fixed income, 4.5% in infrastructure, 10.8% in private equity, and 3.4% in private debt. Since its inception, HEPP has positive returns in 24 of 29 years.

As a result of strong markets in 2025, the fund’s value rose to $13.6 billion, the highest level in the Plan’s history, from $12.2 billion at year-end 2024. Over the past ten years our investment returns added $432 million of value when compared to the Plan’s benchmark returns.

Currently a return of 5.9% is required to fund the Plan’s obligations. The Plan’s exposure to equity-type investments has generated strong returns over the history of the fund. Despite on-going macroeconomic dynamics, we achieved double-digit returns in four of the last five years. On balance, we will maintain our long-term investment focus and asset mix but will review opportunities that become available due to market volatility.

*Total fund returns are after external management, custodial, performance fees, transaction costs and operating expenses. Asset class returns are after external management, custodial, performance fees, and transaction costs but before internal operating expenses.

Major Market Returns (in Canadian $)

Public market equity returns were quite strong in 2025, with the Canadian equity market up almost 32%. Emerging and International markets were also strong, posting returns of 28% and 26%, respectively. The US equity market was up 12% in 2025. The Canadian dollar was stronger by almost 5%, which has the effect of reducing US dollar returns by that amount.

At year-end 2025, Government of Canada 10-year bond yields were at 3.4%, up slightly from their 3.2% level at year-end 2024. By comparison, yields were 0.7% at the end of 2020. The fixed income market returned 2.6% for the year, with corporate bonds outperforming government bonds.

The Canadian real estate market returned 1.3% for the year following a 2.5% return in 2024. Of the four main sectors: office, retail, industrial, and multi-family, only the office market showed an improvement in year-over-year returns.

HEPP Asset Mix

Our overall public equity exposure at year-end 2025 was 58%; largely unchanged from 2024. Our public equity exposure, with a 19.7% return, contributed substantially to our very strong results. Within our public fixed income portfolios, we hold roughly 1/3 each in government bonds, investment grade bonds and high yield bonds. Both high yield and investment grade bonds outperformed government bonds.

Internally, we prefer to look at private market returns over longer periods due to the less liquid nature of these holdings. Our infrastructure portfolio returned 4.5%, down from 16.8% in 2024. Over the past four years, infrastructure has returned 10.9%. Our private equity portfolio, now in its fourth year of investing, generated a 10.8% return, with a four-year return of 15.6%. Our private debt portfolio, which is in its second investing year, generated a one-year return of 3.4% and a two-year return of 16.6%. We have a 5% target allocation for each. Both private equity and private debt returns were higher in their local currencies. All our private market investments are invested over time, meaning that it will be several years before we reach our target allocation.

Real estate returns continue to be impacted by macro-economic factors such as interest rates, demand, and uncertainty about US policy initiatives. Our overall real estate portfolio returned -2.4%. Our non-Canadian real estate return was negatively impacted by a stronger Canadian dollar.

We actively monitor our exposure to equities and our allocations to Canadian, US, and International equity markets as part of our risk management framework. These allocations change over time, reflecting fluctuating return expectations and risk profiles. Additionally, we undertake asset/liability studies every five years or as circumstances require. This work provides the basis for our long-term asset mix to ensure the plan remains fully funded. This type of analysis cannot, however, be used to forecast extreme negative outcomes in the short run.

We currently hold just over 6% of the fund in infrastructure, with a target weight of 10%. We continue to commit funds for our global infrastructure investment program, which continues to perform as expected. We have 9% in our real estate program, slightly below our target of 10.0%. At this time, we are not committing any new funds to this asset class.