With over $100 billion in assets under management and 800 well-paid employees, Ontario Teachers Pension Plan continues to push the boundaries of whats 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. Heres some blurbage:
Teachers' recipe was simple: identify a promising market, lay the groundwork and, years later, reap the rewards with the inside track on money-making projects.A strong believer in pressing a "first-in" advantage, Leech is not about to name the geographies that Teachers is targeting. They will come from a tight list of less than a half a dozen where the fund has quietly built up networks like the ones that made it a market leader in Canada after it was freed from government control in 1990.
The need for secrecy is paramount in an increasingly global industry where investors vie for a first-in or homefield advantage for as long as possible before markets become too competitive. In India or China, investors battle for a toehold, and prices have become steep. Leech suggests he's looking elsewhere.
Heres how Id sum up OTPPs EM model: You take great care in selecting emerging markets that youre 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. Its a fascinating strategy that has paid dividends for Ontario Teachers.
But you have to admit, its pretty courageous to put all your eggs in a hand full of baskets. But, its not all that surprising to see OTPP doing this. When your pension can boast 10% returns over the past 20 years, youve probably earned the right to some bravado!