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Ontario Teachers’ Returns 12 Percent on Private Equity

31 March 2015

(Bloomberg) Ontario Teachers’ Pension Plan, Canada’s third-largest pension fund manager, may open an office in South America as it continues to scour the globe for infrastructure and other long-term assets.

Neil Petroff, Ontario Teachers’ chief investment officer, said the number of investments the pension fund manager has in South America — from water treatment plants in Chile to shopping malls in Brazil — is getting to a point where an office on the continent makes sense.

“Now that we have a critical mass of assets it would be appropriate to be closer to those assets and to grow down there,” Petroff told reporters in Toronto. He noted the pension fund did something similar in London and Hong Kong.

Petroff, who announced this week he’ll be retiring on June 1, said it was still early days and no location has been decided. The South American office will likely be the latest frontier for the Canadian pension fund’s global expansion as it seeks to bolster returns, he said.

Ontario Teachers’ said Tuesday it had returned 12 percent on its investments in 2014, and had net assets of C$154.5 billion ($121.4 billion) as of Dec. 31, an increase of 10 percent from a year ago.

Overall, it had a funding surplus of C$6.8 billion.

Higher Prices
Finding appropriately priced acquisitions remains a challenge, according Ron Mock, Ontario Teachers’ chief executive officer. He said several sovereign wealth and pension funds are aggressively chasing the same targets, a situation exacerbated by easy access to credit that drives up prices.

“That’s also why we have relationships globally because often times our relationships will reveal unique deals and unique opportunities that are not necessarily put out to auction,” Mock said.

Canada Pension Plan Investment Board, for example, announced Tuesday it teamed up with Hermes Infrastructure to acquire a 30 percent stake in Associated British Ports for 1.6 billion pounds ($2.4 billion).

Cressida Hogg, Canada Pension’s head of global infrastructure, said the few sovereign wealth and pension funds that can afford the quality assets on the market have been allocating more money to pursue them.

“There’s more money chasing probably a portfolio of deals where the supply hasn’t gone up dramatically,” she said in an interview.