Direct Investing in Emerging Markets
The key is, apparently, focus. What you give up in terms diversification, you more than gain back in terms of local knowledge. It’s a fascinating strategy that has paid dividends for Ontario Teachers.
With over $100 billion in assets under management and 800 well-paid employees, Ontario Teachers’ Pension Plan continues to push the boundaries of what’s possible within the public pension sphere. Indeed, established on December 31, 1989, OTPP seems to have internal innovation and risk-taking as part of its DNA. For example, OTPP is the genesis of the much vaunted (but hard to replicate) ‘Canadian Model’ of pension fund management – this calls for a significant portion of pension assets to be managed in house. And, now, it seems OTPP is doing some really interesting things in emerging markets. Here’s some blurbage:
Here’s how I’d sum up OTPP’s EM model: You take great care in selecting emerging markets that you’re comfortable and interested in. You then go into a handful of these markets in a very heavy way – as opposed to going into a bunch of regions lightly. Then, you build all the political and business relationships that stack the cards in your favor, which, it is hoped, will generate returns over the long haul. What you give up in terms diversification, you more than gain back in terms of local knowledge. It’s a fascinating strategy that has paid dividends for Ontario Teachers.
But you have to admit, it’s pretty courageous to put all your eggs in a hand full of baskets. But, it’s not all that surprising to see OTPP doing this. When your pension can boast 10% returns over the past 20 years, you’ve probably earned the right to some bravado!