Ontario Teachers’ Fund Gains as Infrastructure Counters Losses

Layan Odeh, Bloomberg News

Repair work continues on the Gardiner Expressway, running east-west through the city just north of Lake Ontario, in Toronto in 2014. , Photographer: Galit Rodan/Bloomberg

(Bloomberg) -- Ontario Teachers’ Pension Plan said infrastructure gains countered losses in public equities, venture growth and credit, giving the retirement-fund manager a 1.2% net return in the first half of the year.

“We’ve changed the composition of the portfolio a lot over the last two years to find value, whether it’s being our move out of fixed income into private companies, or move into assets where we can cover some of the issues and risks of inflation, which performed very well in the first half of this year,” Chief Executive Officer Jo Taylor said in an interview.

The Toronto-based firm cut its investments in public equities to 9% at midyear from 11% at the end of 2021, while increasing its exposure to bonds four percentage points to 18%, according to a statement Monday. Stock markets have plunged this year as soaring inflation and tighter monetary policy have have weighed on corporate earnings and triggered fears about a coming recession.

Real assets account for a fourth of Ontario Teachers’ asset mix -- up three percentage points from last year -- with C$30.6 billion of assets in infrastructure and C$28.6 billion in real estate. Returns on private equity, which make up 23% of assets, were “pretty neutral,” Taylor said.

Ontario Teachers’, which oversees C$242.5 billion ($187.9 billion) of assets, is seeing opportunities in both public and private markets, Chief Investment Officer Ziad Hindo said.

“In the last few weeks, we’ve taken the opportunity to ramping back up our exposure to fixed income,” Hindo said, adding the firm is also looking at opportunities in credit, particularly, high-yield public markets or emerging-market sovereign debt. As for private equity, the fund manager has been “quite active” in trying to make creative acquisitions, he said. “We’ve been trying to see whether we can pick up businesses and aggregate them within our existing platforms.”

Ontario Teachers’ made investments across a variety of asset classes in the first half of the year, including putting $175 million into KKR & Co.’s road platform in India, buying two European logistics properties and committing $1 billion to develop offshore wind projects in a joint venture with Corio Generation Ltd. The fund also partnered with Thomas White Oxford Ltd. and developer Stanhope Plc to deliver Oxford North, a new global innovation district in Oxford, UK.

(Corrects location of property development in final sentence)