Ontario Teachers’ Pension Plan (OTPP), one of the world’s largest pension funds, is beefing up its presence in Asia, which it considers as a strategically important market.
Despite the challenging business environment, OTPP expects the region to contribute significantly to its goal of reaching C$300 billion (US$216 billion) in net assets by 2030. It currently oversees C$242 billion.
As such, having a strong on-the-ground presence across the region is essential, OTPP’s Toronto-based chief executive officer Jo Taylor told The Asset during his recent visit to Singapore.
Last month, the fund opened its third office in the region in Mumbai. Its portfolio of public and private assets in the country currently stands at more than C$3 billion.
Having a local team and office will support OTPP in sourcing investments, fostering long-term partnerships, and onboarding local talent. A founding team of about 10 members will be in place by the end of 2022, Taylor says.
Ontario Teachers’ opened its Singapore office in September 2020. It will soon move to bigger offices to accommodate about 50 personnel, double its current headcount.
This will make the Singapore office its largest in the region, overtaking its office in Hong Kong, which opened in 2013.
Taylor says the fund’s diversification strategy, active management and investing agility, along with its high-quality global investments across a number of asset classes, have served it well in navigating today’s highly inflationary and turbulent markets. He believes the investing environment will remain challenging over the next few years.
Last month OTPP acquired a 30% stake in renewable energy firm Mahindra Susten at an equity value of US$300 million. The deal will enable the fund to explore opportunities in India’s decarbonization aspirations.
While the fund’s principal remit is to make sure it has sufficient assets to meet its long-term pension obligations to members, it must also ensure that its social responsibility is wholly implemented across all its investments.
Ontario Teachers’ incorporates a comprehensive analysis of environmental, social and governance (ESG) risks and opportunities into all the investment decisions it makes, and makes sure its investments are socially responsible and sustainable, Taylor says.
A good example would be its investment in Spandana, one of the largest micro finance institutions in India with operations in 18 Indian states, over 1,000 branches and more than 7,000 employees. The company offers loans predominantly to women from low-income and rural households.
“Previously, the alternative for them would be going to a money lender with a 30% rate of interest, if not more. Our micro finance business gives them the chance to lend to the village where actually you've got great creditworthiness because the village makes sure that people who borrow always pay back,” Taylor says.
Last year, OTPP, through its Teachers’ Innovation Platform (TIP), also invested in CD Finance, a micro financial services provider focused on China’s rural population.
“Our investment in CD Finance is a good example of having a positive impact on the people and communities probably for decades to come,” Taylor says. “These rural farmers have no access to working capital finance but through the platform we can also help them get insurance to get better healthcare, to be able to trade their produce, and make purchases.”
“You can create a whole new ecosystem, new channels for them to be able to really grow. It's also about social mobility outputs for a lot of these people. And it's been a great investment where we own a business that earns a good return and that builds a sustainable future for these agricultural communities,” he adds.
Currently, CD Finance has about 410 branches across 20 Chinese provinces. The firm estimates more than 7 million people in rural areas have benefited from its services.