Ontario Teachers’ Pension Chief Explains Why Fund Looks Outside of Canada For Direct Investment Opportunities

Canada blank map

The Ontario Teachers’ Pension Plan (OTPP) is among the growing number of pension funds making large direct investments in companies – buying stakes in companies directly as opposed to working with private equity firms.

But the vast majority of the OTPP’s direct investments are made in foreign companies, not Canada. Why is that?

OTPP chief executive Ron Mock explained on Wednesday the methodology that leads the fund to leave Canada behind when making direct investments. From the Financial Post:

The Ontario Teachers’ Pension Plan may prefer to make its direct investments outside of Canada, but don’t interpret that as a sign the institution isn’t confident in the country’s economy, chief executive Ron Mock said on Wednesday.

Mr. Mock made the remarks at The Canada Summit 2014, a conference hosted by The Economist magazine in Toronto. Mr. Mock discussed the biggest opportunities and challenges facing the pension fund.

In the early 2000s, the teachers’ pension plan shifted away from a traditional mix of bonds and equities into direct, private investments, a move Canada’s other major pension plans followed. Mr. Mock, who has been on the job for about a year, said the shift in strategy was necessary to generate the returns it needed to provide retirement income for 300,000 working and retired teachers.

Today, about 70% of the pension fund’s direct, private investments are outside Canada, Mr. Mock said.


The strategy has come with challenges. Mr. Mock said one of the biggest difficulties is navigating the legal systems and governance requirements of foreign countries when buying large stakes in their companies.

Mr. Mock cited Asian companies that have not yet gone public among investment opportunities he’s keeping an eye on. He said the pension fund doesn’t typically make venture capital investments in Canadian companies because those types of investments are generally in the tens of thousands of dollars, while he’s looking to invest hundreds of millions at a time.

“As a fiduciary, we really do have to focus on earning the returns on behalf of the teachers,” he said.

Another opportunity he’s keeping his eye on is infrastructure investments in Europe and Canada. He said pension funds have a role to play in helping Canada address its crumbling infrastructure problem over the next 10 years.

“I think that is a vital opportunity in Canada,” he said.

The OTPP manages $140 billion in assets.

Pension Funds Attracted To India’s Infrastructure, Real Estate

India gate

Money is flowing into India as The Canada Pension Plan, along with a handful of other pension funds from around the globe, are increasingly investing in the country’s infrastructure and real estate. From the Financial Times:

CPPIB [Canada Pension Plan Investment Board] entered India in 2010 but has recently raised its profile with a series of deals involving long-term assets such as toll roads and residential property, creating a portfolio of planned investments worth $1.4bn that already ranks among the largest investments in the country by a foreign pension fund.

“Because it is a very small percentage [of the fund’s overall assets], clearly it is likely to grow, as India keeps growing and developing,” Mr [Mark] Machin, [international head of CPPIB] said.

“We will almost inevitably have more money focused on India. . . It is one of the most important markets for us in the region,” he added.


In June, CPPIB announced a $332m infrastructure investment partnership with a division of Larsen & Toubro, India’s largest engineering group by sales. That followed deals to invest in real estate with two family-owned conglomerates, the Piramal and Shapoorji Pallonji groups.

The fund has also built up large portfolios in Australia and China, with deals worth $5.9bn and $4.1bn respectively, in assets ranging from property development to logistics.

The Canada Pension Plan is one of many pension funds turning its focus to India. From FirstBiz:

Many sovereign and pension funds are pumping funds into the Indian real estate like All Pensions Group (APG Group), Abu Dhabi Investment Authority (ADIA), Qatar Investment Authority (QIA), Canada Pension Plan Investment Board (CPPIB), State General Reserve Fund of Oman (SGRF) and GIC of Singapore.

It’s no coincidence that investment interest has perked up following the election of Prime Minister Narendra Modi. Mr. Modi has said he’ll lift some restrictions on foreign investment and kick-start a new wave of infrastructure projects.