Canada Pension OPTrust To Bring Trading In-House

Following in the footsteps of its Canadian peers, the pension plan OPTrust said it plans to build a trading floor and bring more asset management in-house.

OPTrust started the process back in June; it has hired seven portfolio managers and plans to hire three more. In all, about half of the fund’s total AUM of $14 billion will be managed internally.

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The move to internalize oversight of foreign-exchange, fixed-income and derivatives strategies is meant to improve the pension plan’s risk management by getting “closer to the coal face,” said James Davis, OPTrust’s chief investment officer, who’s handling the transition. The fund, ranked 18th by assets in Canada according to a research of pension funds by London-based Willis Towers Watson Plc, currently has external firms managing its market assets.

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The fund is at the low end in terms of assets to move management in-house but it makes sense to internalize some of their activities, said Donald Raymond, chief investment officer and managing partner at Alignvest Management Corp., who built the public markets investments department at Canadian Pension more than a decade ago. “They’re looking at what other larger pension funds have done and they’re following in those proven footsteps.”

OPTrust has already hired seven of the 10 portfolio managers. They will be involved in both formulating trade ideas as well as executing the trades. Several more people will be employed to handle compliance and other roles such as the settlement of trades and custody, Davis said.

The pension fund’s larger peers generated double-digit returns last year as high as 16 percent; meanwhile, OPTrust returned 8 percent.