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Top Canadian pension fund plans push into private markets

The Ontario Teachers’ Pension Plan is pushing $ 70 billion into a new private market, from infrastructure to real estate, as one of the world’s largest retirement plans is trying to escape low interest rate penalties. We are preparing.

The $ 221 billion plan, responsible for managing retirement savings for more than 300,000 Canadians, plans to invest that amount in the private market over the next five years, in the public market and other pension funds. Shows a break from the public market, which is primarily dependent on. Their return.

Jo Taylor, President and Chief Executive Officer of OTPP, said: ..

“For now, we’re aiming for better, more balanced returns in other asset categories with very low yields (from fixed income),” he added.

Ambitions are a significant step up from C $ 45 billion that OTPP has in real assets. Under that plan, the share of real assets could rise to about one-third of the portfolio, up from one-fifth at the end of last year.

The private market includes both real estate, infrastructure and other real assets, as well as private sector debt and capital.

Founded in 1990, OTPP is already a hot investor. Its largest investments include West London’s “creative campus”, White City Place, and the Toronto Complex, The Ritz-Carlton.Recently bought Karna In Finland, utilities, and Ebolts In Brazil, the transmission business.

However, Taylor said deeper entry into the private market would increase the weight of funds outside of North America from the current 30%, with a particular focus on Europe and Asia. Under this plan, 50% of future private investment will be made outside of North America.

Earlier this year, Jo Taylor announced plans to be “bolder and bigger” by investing in achieving its goal of increasing assets to C $ 300 billion by 2030.

“This is a major departure from our current portfolio. Approximately 70% of our assets are based in Canada and the United States,” Taylor said. “We want to be an international investor.”

Institutional investors, including pension funds, typically use bonds and equities as two components of their portfolio, and the duration of their investment is associated with the long-term nature of their liabilities.

However, analysts say that the combination of low bond yields and expected low profits from the stock market allows more pension funds to have higher returns but assets are usually illiquid credit and private equity. They say they will be forced to shift their allocations to private markets such as.

“Asset owners, including pension funds, expect to continue to increase their quotas in the private market,” said Michael Sipris, an analyst covering Morgan Stanley’s brokers, asset managers and exchanges. Stated.

Earlier this year, Taylor, who became head of the OTPP in 2020, plans to be “bolder and bigger” with investments to reach the goal of increasing assets to C $ 300 billion by 2030. Announced. It remains fully funded.

Headquartered in Toronto, OTPP has small businesses in New York and San Francisco, as well as businesses in London, Singapore, Toronto and Hong Kong. The fund is expanding its internal investment team to account for planned allocations to the private market.

“We need in-house skills to be able to continue to perform at a very high level to take the right risks and ensure returns to reach our $ 300 billion goal.” Said Taylor.

“We are seeing strong growth,” Taylor said of Asia. “We want to increase our exposure over time.”

“But that doesn’t mean we haven’t seen big profits and growth yet in North America. The US market has been really successful for us for a long time. With some stimulus, we’ll probably see good growth as well. “

Despite criticisms of China’s human rights records, the Canadian fund is expanding its investment in China, including China’s education and technology sector.

“There are problems around the world when it comes to government political agendas,” Taylor said.

“We strive to be thoughtful when it comes to the businesses we invest in, but our requirement is a balanced portfolio of $ 200- $ 300 billion internationally, across the globe. It’s about how to achieve that. If you completely eliminate a country like China, it’s probably very difficult to achieve. “

Top Canadian pension fund plans push into private markets Source link Top Canadian pension fund plans push into private markets

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