TORONTO - The Ontario Teachers' Pension Plan says it had a $9.6-billion funding shortfall to start 2012, even though its net assets reached an all-time high in 2011.

The fund, which invests on behalf of and administers the pensions of 300,000 active and retired teachers in Ontario, said Tuesday that the shortfall came despite a rise in contribution rates and lowered benefits.

Persistently low interest rates and changing demographic trends have chipped away financially at the plan.

The liabilities of Teachers, or the projected cost of providing future pensions, is still outpacing the expected growth of its assets, said president and chief executive Jim Leech in an interview.

"Teachers are working for about the same (amount of time) as they used to, which is around 26 years, but now they are retiring for 32 years," he said, a sign that more people are living longer.

"We've got 2,600 pensioners now over the age of 90, we've got 102 over the age of 100."

He said the fund is working with sponsors, the Ontario Teachers' Federation and the Ontario government, to advise them on various options for "closing this gap at a reasonable cost."

The plan reported net assets of $117.1 billion as of Dec. 31, with $11.7 billion added to the fund thanks to an 11.2 per cent rate of return.

The improvement, the fund noted, came in the face of market uncertainty and volatility during the height of the European debt crisis.

That return beat the fund's own internal goal of 9.8 per cent by 1.4 percentage points or about $1.4 billion.

"Our team's 2011 performance was especially impressive, given the market volatility and economic uncertainty that accompanied the eurozone debt situation and was compounded by the year's natural disasters," Leech added.

The combined value of the plan's public and private equities was $51.7 billion at year-end, compared with $47.5 billion at the same point a year earlier.

Private equity assets managed by Teachers' Private Capital totalled $12.2 billion, up slightly from $12 billion the previous year. Return on the private investments was 16.8 per cent.

Fixed income assets rose to $55.8 billion from $45.9 billion, up 19.9 per cent. Commodities investments rose to $5.7 billion in 2011 from $5.2 billion.

The value of real assets, including real estate, infrastructure and timberland dropped to $25.8 billion from $26.2 billion.