OMERS announced today that it will reduce its exposure to stocks and bonds and will invest more in private deals.

The Ontario pension plan says will reorganize parts of its investment organization to implement a new growth strategy in private equity, infrastructure and real estate assets.

Under its new asset mix policy approved last Thursday, up to 35% of the total fund will be invested in these alternative assets over the next four to five years, compared with 18% currently.

As part of its asset mix reallocation, OMERS will reduce total fund exposure to publicly traded stocks and bonds from 80% to 60%. The allocation to real return bonds will increase from three to five%.

“The OMERS Board has been considering a new asset mix policy and the need for a revitalized investment organization since early 2003,” said board chairman Frederick Biro, in a statement. “We have also introduced a new business model to facilitate the new asset mix by reorganizing OMERS interests in Borealis Capital Corp. and Oxford Properties Group, as well as our private equity organization.”

The principal shareholders of Borealis Capital (OMERS, CPP Investment Board and Kilmer Van Nostrand Co. Ltd,) agreed that it was appropriate for OMERS to repatriate Borealis under its new asset mix policy and business model as OMERS owned 95% of the assets managed by Borealis.

OMERS will create Borealis Infrastructure Corp. (BI) to implement a global infrastructure mandate. Michael Nobrega, Borealis managing principal and president, has been appointed CEO of the new company. BI will manage the OMERS $1 billion infrastructure portfolio.

The real estate management team and $6.7 billion of OMERS-owned office properties and shopping centres managed by Borealis are being transferred to OMERS-owned Oxford Properties Group. Michael Latimer, Borealis managing principal and COO, has been appointed Oxford president and CEO. Oxford will be OMERS global real estate flagship.

The private equity strategy will be carried forward by the OMERS Merchant Banking Group. Ian Collier, Borealis managing principal and CEO, will be CEO of the group, which will implement a new global mandate. The merchant banking group will manage the $1 billion OMERS private equity portfolio and seek new opportunities to direct invest itself and co-invest with like-minded investors.

All three entities will receive OMERS full financial and operating support and will be accountable through the OMERS CEO to the OMERS board.

OMERS CEO Paul Haggis said that, “Alternative non-marketable assets, as a function of our asset mix policy, should deliver strong returns over the long haul. We want to make sure we create optimum value for our retirees through enhanced investment returns and operating cost efficiencies.”

Stocks and bonds will continue to dominate OMERS asset base. The pension fund currently has $13.3 billion invested in publicly traded stocks, $13 billion in fixed income securities, including real return bonds, and $0.3 billion in absolute return investments.

With $32.7 billion in net investment assets, OMERS is one of Canada’s largest pension funds and provides secure retirement benefits to 340,000 active and retired members on behalf of 900 local government employers across Ontario.