Professional Documents
Culture Documents
Ontario Teachers Pension Plan
Ontario Teachers Pension Plan
Plan
FNCE6004 – Advanced Portfolio Management
Petar Miljkovic
Description as provided by the Statement of Investment
Policies and Procedures January 1, 2018
• “It is a contributory, defined benefit • The annual pension payable is equal
pension plan co‐sponsored by the to 2% of the member’s highest 5-year
Ontario government and the Plan average salary multiplied by the
members, who are represented by number of years of service.
Ontario Teachers’ Federation.”
https://www.otpp.com/investments/performance
OTPP Fund Performance compared to select
OECD member country averages
• The Organisation for Economic Co-operation
and Development provides data for global
comparison.
• The 5-year average for Canadian funds is the
4th largest in terms of nominal returns and
the largest in terms of real returns.
• OTPP reports in their 2008 annual report a • OECD reports that in 2008 countries with
return of -18.0% equity dominated portfolios suffered the most.
• Plan to reduce equity allocation from 45% • OTPP still performed better than the average
to 40% and fixed income from 22% to 15%
Canadian fund
OTPP 2009 Annual Report pp 2-3 OECD: Pensions at a Glance 2009 pp 35-36
Global Operations & Investing
• “Our exposure to the economies of different
countries around the world, like our
investments in a diversified range of asset
groups, reduces overall volatility and offers
the potential for better returns. Because we
invest globally and report in Canadian dollars,
we actively manage our currency exposures.”1
• Due to the political atmosphere in the U.K.
CIO Bjarne Graven Larsen said that OTPP took
a partially hedged currency position in the
British Pound.2
• In 2016 the impact of currency had a -2.8%
impact on total-fund return while in 2015
there was a +8.3% impact on total-fund
1) https://www.otpp.com/investments/performance/investment-strategy/asset-mix
return.3 2) https://www.bloomberg.com/news/articles/2017-03-29/ontario-teachers-
returns-decline-from-previous-year-on-currency
3) Source:OTPP 2016 annual report, page 2,16
Global Investment: Grupo BTG Pactual
• BTG was the largest independent • Teachers investment of $206
investment bank in Latin million made in December of
America. 2010 fell below $150 million in
• CEO was arrested for attempting December of 2015.
to obstruct a corruption probe in • “We remain an investor,”
the investigation of Petrobras Teachers’ spokesperson Allan
and for money laundering and confirmed in an email, adding,
politicians for accepting bribes. “it remains part of our
• One of nine financial institutions relationship investing portfolio,
placed under surveillance by in our public equities asset
Brazil’s central bank. class.”
http://business.financialpost.com/news/fp-street/buyer-beware-how-
teachers-got-caught-up-in-the-fallout-of-brazils-biggest-scandal
Notable Recent Investments
http://www.farms.com/ag-industry-news/ontario-s-teachers-starting-to-
invest-in-agriculture-532.aspx
Private Equity and Alternative Investments
• The private equity group of OTPP • OTPP has very stringent rules,
has brought in 20% returns, net of including an 8% hurdle rate, when
costs. investing as a LP in alternatives.
• The group has grown from 2010, • There is still a preference for co-
when it represented 11% of assets investing, in which the fee is
under management to 15% as of removed and OTPP has a say in
August 2017. operations.
• SVP of private capital, Jane Rowe, • Rowe also comments as to
comments on an intention of management preferring their long
growing the group to at least 19% term investment style over the
of AUM in the future. traditional 3 to 4 years of private
equity.
https://www.top1000funds.com/profile/2017/08/03/o
tpps-private-equity-revolution/
Leverage Risk
References
ANNUAL SURVEY OF INVESTMENT REGULATION OF PENSION FUNDS(Publication). (2017). Retrieved January 18, 2018, from Organisation for Economic Co-operation
and Development website: https://www.oecd.org/daf/fin/private-pensions/2017-Survey-Investment-Regulation-Pension-Funds.pdf
Deveau, S. (2017, March 29). Ontario Teachers' Posts Worst Return Since 2008 on Pound's Drop. Retrieved January 19, 2018, from
https://www.bloomberg.com/news/articles/2017-03-29/ontario-teachers-returns-decline-from-previous-year-on-currency
Pensions at a Glance 2009(Publication). (2009). Retrieved January 20, 2018, from Organisation for Economic Co-operation and Development website:
http://www.oecd-ilibrary.org/finance-and-investment/pensions-at-a-glance-2009_pension_glance-2009-en
Pension-Markets-in-Focus-2016(Publication). (2016). Retrieved January 20, 2018, from Organisation for Economic Co-operation and Development website:
https://www.oecd.org/daf/fin/private-pensions/Pension-Markets-in-Focus-2016.pdf
Ontario’s Teachers’ Pension Plan (2016). 2016 Annual Report: A Plan for All Seasons, 2, 5-9, 13-14, 6-17, 29, 56.
Ontario’s Teachers’ Pension Plan (2008). 2008 Let us explain how the economic crisis has affected your pension plan’s performance. And what we’re doing about it., 2, 5-9,
13-14, 6-17, 29, 56.
Statement of Investment Policies and Procedures for Ontario Teachers’ Pension Plan (“SIPP”) (2018). 2016
Tedesco, T. (2016, June 26). Buyer beware: How the Ontario Teachers' Pension Plan got caught in the fallout of Brazil’s biggest scandal. Retrieved January 19, 2018, from
http://business.financialpost.com/news/fp-street/buyer-beware-how-teachers-got-caught-up-in-the-fallout-of-brazils-biggest-scandal
Rundell, S. (2017, August 03). OTPP's private equity revolution. Retrieved January 19, 2018, from https://www.top1000funds.com/profile/2017/08/03/otpps-private-equity-
revolution/
Q&A