Ontario Teachers’ Pension Plan (OTPP) intends to establish a real estate team and expand its infrastructure portfolio in Asia this year in a drive to treble its regional exposure over the next five years.

Canada’s third-largest retirement fund has around 10% of its C$201.4 billion ($150.2 million) allocated to Asia-Pacific. The plan under new chief executive Jo Taylor is to raise that to around 30% over the next five years, with a similar amount in Europe and North America.

This ambitious target will see the fund “doubling its headcount” in Asia, said regional head Ben Chan. “That process remains on track.”

OTPP has 26 staff in Hong Kong, and that number will likely rise in 2020 by eight or 10 hires or transfers from other offices, largely in the form of investment staff. It also envisages opening more branches in the region, with Australia, India and Singapore all locations under consideration.

The fund is doing so despite the coronavirus outbreak convulsing global markets, months of protests in Hong Kong and a trade spat between China and the US. 

Ben Chan

“We are a lot more long-term than the average investor,” Hong Kong-based Chan said. “Geopolitical issues come and go; we consider them, but do they make us majorly change our asset allocation? Not really.”

OTPP has no property professionals or real estate assets in Asia-Pacific as yet, but they are “in the plan” for this year, he added.

The pension fund’s real estate investment arm, Toronto-based Cadillac Fairview, will determine the size, format and destination of any capital commitments.

But they will probably initially take the form of commitments to commingled funds, Chan said, as has been OTPP’s typical approach to new asset classes in the region. Indeed, this remains the most common strategy for the fund’s initial private market investments outside North America, he added.

INFRASTRUCTURE PUSH

OTPP is also growing more active in infrastructure in Asia. Last year it agreed to invest up to $1 billion into India’s National Investment and Infrastructure Fund Master Fund alongside Melbourne-based retirement fund AustralianSuper. 

This reflects strong demand for Indian infrastructure among other institutional investors, including Canada Pension Plan Investment Board (CPPIB), La Caisse de Dépôt et Placement du Québec (CDPQ) and Ontario Municipal Employees’ Retirement System (Omers). 

OTPP is set to build up infrastructure capabilities in Asia, as Taylor told AsianInvestor early last year; regional investments in the asset class have typically been led by the team in Toronto. 

Other asset classes are also on the table. OTPP has invested in two private credit funds in Asia in the past 12 months, said Chan, but it has put in “a relatively insignificant amount relative to our global AUM”. 

“But it’s something we might do more of in future as Asian private credit markets mature and as we accumulate more experience on the ground.” 

For the time being, though, private equity remains the fund’s main focus in Asia and accounts for most of its assets and staff in the region. And that’s unlikely to change quickly, given that the asset class was by far its best-performing in 2018, posting a 19.5% return, by the latest annual report, published in April 2019.

OTPP's expansion drive in Asia reflects moves by other Canadian pension funds in recent years, such as CPPIB, CDPQ, Omers and PSP Investments

Similarly, Dutch retirement fund manager APG has been rapidly building out in the region and Texas's teachers pension fund is working to open an office in Singapore, which would be its first in Asia. 

This is adapted from a longer interview feature with Ben Chan that will appear in the upcoming (Spring 2020) edition of AsianInvestor magazine.