Local partners are key to Ontario Teachers' Pension Plan's success
The Canadian asset manager is well known for generating superior or long-term returns
Finding the right local partners is the phrase that comes up most when doing an interview with Ron Mock, who took over at the helm of the Ontario Teachers' Pension Plan just over five months ago.
Known for generating superior long-term returns, OTPP, which has C$130 billion (HK$926 billion) in assets under management on behalf of 300,000 active and retired teachers, has hired seven private equity firms in the region since it launched its regional office in Hong Kong last year - the second overseas office after London.
"We think it is most important to find deals where we have deep partnerships with the governments and investment professionals with deep local knowledge," Mock said. "We believe those relationships will translate into investment opportunities and better pricing, which is our edge when investing for the long term."
It is most important to find deals where we have deep partnerships
Unlike most private-equity firms running a pan-Asia portfolio, the fund prefers to hire country-focused managers to handle their capital because it believes they would have an in-depth knowledge of local culture and investment dynamics.
The fund is also in a privileged position to have a mandate to invest for a long time in order to avoid short volatility when investors often buy at the peak and sell in a trough. Even with a gigantic portfolio, it had reported a return of about 10 per cent last year after delivering double-digit returns for the past few years.
Among the seven existing private-equity firms, it had spent about US$100 million to US$600 million for each, it said.
In Asia-Pacific, its largest investment is a US$2.3-billion co-investment with Hastings Funds Management in a New South Wales desalination plant in 2012. It invested a combined HK$1.3 billion in Macau casino and hotel developer Louis XIII last year, according to Dealogic.
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.
The fund has stakes in Chinese companies including Hong Kong's Chow Tai Fook, the world's biggest jewellery firm, and Jingdong Mall, a mainland e-commerce operator looking to raise US$1.7 billion in a US listing.
Mock said the number of staff in Hong Kong office should double to about 20 people this year, with a senior manager overseeing the regional office.
"The Hong Kong-based executive should have the ability and authority to tap and bring any resources into the region, leveraging our existing capability in Toronto and London," said Mock, who hinted at an office in Mexico.
Apart from building relationships with private equity firms, the Canadian fund builds close relationships with China Investment Corp, the country's US$575 billion sovereign wealth fund, Singapore's duo Temasek and GIC as well as Abu Dhabi Investment Council, aiming to flourish "two way flows" where Asian investors are interested in buying properties overseas.
"We can bring our expertise in North America, in which our wholly owned real estate subsidiary Cadillac Fairview can offer candid market perspective in New York and Canada," Mock said. "Short terms hiccups in local property markets would not deter their interest, because they are thinking about … returns over the next 30 years."
