The Ontario Municipal Employees Retirement Board earned a 12.7% return in 2003, ending two years of losses as the pension fund benefited from the rebound in stock markets.

OMERS said today that net investment income totalled $3.8 billion, compared with a $2.2-billion loss in 2002, led by the recovery of Canadian and foreign stock markets to produce equity income of $3.1 billion.

Fixed-income securities, including real-return bonds, generated $668 million in income, while real estate added $56 million, a sharp reduction from $245 million a year earlier.

However, OMERS also wrote off $232 million related to real estate, primarily goodwill allocated to properties acquired since 1999, plus $183 million of private equity and infrastructure assets.

“Our 2003 earnings were more than sufficient to meet our 2003 funding requirements,” said Paul Haggis, OMERS president and CEO, in a release. “Now we want to achieve sustainable and superior long-term returns. We are reorganizing OMERS to do that”

OMERS said one-third of the pension fund will eventually be invested in alternative assets such as real estate, infrastructure and private equity.

The pension fund had total investment assets of $32.7 billion at the end of 2003.

OMERS provides retirement benefits to about 340,000 active and retired members on behalf of 900 local government employers across Ontario.