Canadian pension fund sets up Hong Kong base for growth

Ontario institutional investor will use its new office in the city to build networks as it looks to nearly double its assets in the region

PUBLISHED : Tuesday, 17 September, 2013, 12:00am
UPDATED : Tuesday, 17 September, 2013, 3:35am

Ontario Teachers' Pension Plan, one of Canada's largest institutional investors, wants to nearly double its Asia-Pacific investments within three years by building relationships with people and companies in the region.

Known for generating superior long-term returns, OTPP, which has more than C$129.5 billion (HK$975 billion) in assets, hopes to make more deals in the region after opening a Hong Kong office yesterday, its second overseas office following one launched in London in 2007.

The pension fund's managers said it aimed to boost its assets in the Asia-Pacific region to about C$20 billion in three years from more than C$11 billion now.

"One of the hallmarks of our investment beliefs is partnership in various locales with people who are comfortable with the same beliefs," Jim Leech, OTPP's president and chief executive, told the South China Morning Post yesterday.

The best time to come to Asia was 30 years ago, and the next best time … is today

Unlike pension funds in the United States, which he said were often stuffed with politicians and union hacks, OTPP, which is one of the largest and most aggressive pension funds in North America, selects people with backgrounds in business and finance, sidestepping short-term goals and political influences.

Leech said the fund was looking "to build new relations with local expertise" and "from those relations come investments".

"One thing that distinguishes us from other private equity firms is time horizon," he said.

OTPP had been able to achieve a stable and higher return for its beneficiaries because its average investment horizon was more than 10 years, much longer than the private equity industry norm of five years, Leech said. This eased the pressure for the fund to chase short-term profits and allowed it to ignore price volatility due to external factors.

OTTP had a 13 per cent return last year, beating the median gain of 9.4 per cent among Canadian pension funds, it said in May.

"Having invested through and alongside [other private equity firms], it's now growing to the extent that it makes sense for us to put our own feet on the street to make those relationships deeper and to build new relationships and understand the [local] business community better," Leech said.

He stressed that the fund aimed to focus on building relationships at this juncture, pointing out that its London office's first deal was initiated about five years after the office was set up.

"In our public equities investments, relationship investing is a dominant part of our pan-Asia investments," OTPP chief investment officer Neil Petroff said.

The fund has stakes in Chinese companies including Hong Kong's Chow Tai Fook, the world's biggest jewellery firm, and 360buy Jingdong Mall, a mainland e-commerce operator.

Petroff said of the Hong Kong office: "It is like planting a tree. The best time to come to Asia was 30 years ago, and the next best time to plant a tree is today. By setting up an office in Hong Kong, its geographical proximity helps us to oversee our pan-Asian business as well as China, with huge potential for investment."

Last year, he said, "the investment team travelled 12 million miles" on trips to the region.