OTPP remains patient and prudent in Asia

The Canadian pension fund opened its Hong Kong office almost three years ago and intends to keep its ‘steady eddie’ investment approach to the region.

Ontario Teachers’ Pension Plan (OTPP), one of the early pioneers of direct investing to arrive in the early 1990s, is determined to walk before it runs in Asia.

The fund is still in the early stages of its co-investing objectives in the region, OTPP managing director for Asia-Pacific, Nicole Musicco said at the PEI Director Summit in Hong Kong. “Our Asia-Pacific office just opened in 2013 so we are still very much focused on making sure we are doing the right deals with our partners.”

OTPP is a long-term Asia optimist and has been investing in the region since 1991. Last year, it allocated up to 8 percent or C$14 billion ($11 billion; €10 billion) to the region, according to its 2015 annual report.

It had recently invested $200 million in Indian e-commerce group Snapdeal and has made commitments to Asia-focused firms including Kedaara Capital, MBK Partners and FountainVest Partners.

“Compared with North America and Europe, it’s a newer strategy for us to be boots on the ground in this region,” said Musicco, who was appointed to head up OTTP’s Asia operations in September last year in a newly created role. “I think a lot of the time spent is getting to know our partners and developing deeper relationships with them. What we are doing out here is to try to be patient, prudent and opportunistic investors.”

OTPP’s Hong Kong office started two years ago with a handful of investment professionals. It has now grown to a team of 11 with plans to hire more staff as its makes further investments in Asia.

At the time of Musicco’s appointment, OTTP chief executive officer and interim chief investment officer Ron Mock said in a statement: “Nicole’s new role reflects our growing commitment to the Asia-Pacific market and its importance to the future of our fund.”

Musicco told the conference: “In this market, what Teachers’ hopes to bring is this history of being predictable, transparent, agile partners who can reach into our global network and help them to do cross-border type of transactions in this part of the world and bring this outside Asia.”

When asked about trends that stand out Musicco said the fund believes in the long-term trend of the consumer and currently likes consumer discretionary and healthcare opportunities, having invested growth capital to Chinese entrepreneurs such as Hong-Kong based jeweller Chow Tai Fook, e-commerce company JD.com and online marketplace 58.com.

In the early 1990s, OTPP pioneered a move among pension funds to run its portfolio internally and invest directly in companies as an alternative to Canadian equities and government bonds. Approximately 80 percent of its investment portfolio is managed in-house.

OTPP’s assets grew to C$171.4 billion at the end of 2015, from C$154.5 billion a year earlier. It also reported a 13 percent investment return for 2015, compared to 11.8 percent in 2014.

It ended last year 107 percent funded, with a surplus of C$13.2 billion, it said in its latest annual report.