OTPP's CIO Shares a Great TIP

The Ontario Teachers’ Pension Plan is going to invest in a global disruptive technology through a new innovation platform:

Ontario Teachers' Pension Plan (Ontario Teachers') is pleased to announce it is launching a new investment department, Teachers' Innovation Platform (TIP). TIP will focus on late-stage venture capital and growth equity investments in companies that use technology to disrupt incumbents and create new sectors.

"We are excited to build a platform that leverages our track record, internal talent and partnership model," said Ziad Hindo, Chief Investment Officer at Ontario Teachers'. "It will not be anchored to any particular region, meaning we can go anywhere in the world where there is opportunity."

Olivia Steedman will build and lead TIP as its new Senior Managing Director. Ms. Steedman has been at Ontario Teachers' since 2002. She has been a founding member and senior leader of the infrastructure and natural resources group, which has grown into a $26 billion global platform.

"This is a time of unprecedented change in multiple areas including computing, materials science, robotics and medicine. There are significant opportunities to invest in the new businesses and sectors that are emerging as a result of this change," said Ms. Steedman.

Ontario Teachers' believes the new platform has the potential to generate strong, above-market returns for Plan members. The world is changing, and we are committed to finding new areas of opportunity to position our portfolio well for the future. As an active and long-term investor with deep partnerships around the world, Ontario Teachers' can move quickly to source and make investments. It can provide patient and intelligent capital to support sustainable value creation.

Joseph Rai of VCCircle notes the late-stage VC platform isn't limited to any one geography and could make investments in India where Teacher's already has a strong presence:

The pension fund’s India portfolio includes microfinance institution Spandana Sphoorty Financial Ltd and e-commerce company Snapdeal.

It is also an investor in the funds of private equity firm Kedaara Capital.

Last year in March, Ontario Teachers had roped in Ben Chan, a former top executive at Malaysian sovereign wealth fund Khazanah Nasional Berhad, as its Asia-Pacific head.

Ben Chan has a huge job at Teachers' as Regional Managing Director, Asia Pacific. He reports to Jo Taylor, Executive Managing Director, Global Development, and is based in the Hong Kong office where he leads investment activities.

Yesterday, I read a two-minute interview with Suyi Kim, CPPIB's Senior Managing Director  & Head of Asia Pacific and thought she nailed and when she said this:

"We’ve built a 10-year track record on dependability and transparency. Having a lot of capital does not differentiate us in Asia. What differentiates us is being a sophisticated long-term investor and having strong talent on the ground."

All this to say, if you're going to tackle Asia, you need experienced and qualified boots on the ground, you can't do it from your office in Toronto, Vancouver or Montreal.That's why people like Ben Chan and Suyi Kim are so critical to these organizations, just like Anita George is to the Caisse.

Anyway, OTPP is no stranger to investing in growth companies. It recently finalized an investment partnership with Toronto-based Fleet Complete, a tech company operating in the connected vehicle space. I  covered Teachers' investment in Fleet Complete here and think this will be a great long-term investment in a fast-growing Canadian company.

And last August, OTPP partnered with BMO Capital Markets to launch a blockchain pilot to assess the viability of using blockchain technology for fixed-income markets. The transaction included Bank of Montreal as the issuer and Ontario Teachers' as the buyer of a CDN$250MM 1-year floating rate Deposit Note, making it the first Canadian dollar fixed income issuance demonstrating the viability of blockchain platforms.

But apart from sporadic deals in late-stage growth companies or new technological platforms, there was no dedicated platform at Ontario Teachers' solely looking at late-stage growth and innovation.

So, this is big news and Olivia Steedman is taking on big responsibilities heading up Teachers' Innovation Platform (TIP).

I've never met Olivia (shown below) but I've heard nothing but positive things about her from Andrew Claerhout, OTPP's former head of Infrastructure and Natural Resources and her former boss.

I sent an email out to her and Ziad Hindo, OTPP's CIO, to discuss TIP and  get more context and what exactly this platform will be doing.

Ziad was kind enough to follow up with me and we spoke late this afternoon.

I began by congratulating him on his nomination to the CIO position which took place almost a year ago. Being the CIO of Ontario Teachers' carries tremendous responsibilities but I've heard nothing but positive things about Ziad (again, from Andrew and others) and he has a great team and boss backing him up.

Ziad began by saying "disruptive technology is everywhere" and OTPP built this innovation platform for three main reasons:

1. Defensive: OTPP has over 100 portfolio companies and they want to understand how disruptive technology will impact them. This is part of Teachers' rigorous risk management approach.
2. Offensive: OTPP is seeking high risk-adjusted returns and this platform will allow them to capitalize on new opportunities in disruptive technologies that will shape the world for years to come.
3. Access to innovative partnerships: The platform will alow OTPP to build on its existing partnerhips but also to build new partnerships with technology leaders.

On that third point, Ziad mentioned OTPP's recent deal with Verily, an Alphabet (Google) company, on a $1 billion investment round led by Silver Lake, as it advances plans on business strategies that are additive and complementary to its current life sciences portfolio.

If you look at Verily's website, you'll read this:

Verily lives at the intersection of technology, data science and healthcare. Our mission is to make the world's health data useful so that people enjoy healthier lives.

Verily is developing tools to collect and organize health data, then creating interventions and platforms that put insights derived from that health data to use for more holistic care management. We have three guiding product design principles: start with the user, simplify care, and lead on security and privacy.

Pretty cool stuff. There's no doubt in my mind that Ontario Teachers' long relationship with Silver Lake, one of the best private equity funds focusing on late-stage technology, allowed it to be part of this deal with Verily.

Ziad told me there will be other partnerships that complement the existing private market activities. And these partnerships won't just be in the US or Canada, they will be global.

In fact, he told he just came back from a trip to Asia where he was with Ben Chan and was very impressed with how disruptive technology is changing the landscape in Asia in areas like payment systems, telecom, renewable energy and more.

"Disruptive technology in Asia is as powerful or more powerful than the rest of the world," he said.

I then asked him if this new platform is going to be doing the same thing as OMERS Ventures headed up by Damien Steele and OMERS Growth Equity headed by Mark Shulgan (click on image):

As you can read, OMERS Growth Equity will be filling the space between their partners in Private Equity (headed up by Mark Redman) and Ventures, and focus on significant growth at the mid-stage end of the market.

OMERS Ventures has backed some of Canada's leading technology startups of the past decade, including Shopify, and it recently announced plans to expand to Europe with a dedicated €300m fund to make long-term investments in some of the continent’s most innovative technology startups.

Other large Canadian pensions have also embraced new technologies and are closely monitoring developments in AI and new tech platforms, so I wanted to know the aproach behind Teachers' Innovation Platform (TIP) and how scalable it is.

Ziad told me that "every pension has their utility function" and they know and respect OMERS but are going to approach this platform in their own unique way.

In terms of scale, he agreed with me that you can't get a lot of scale in early-stage VC funds where funds are capped at a few hundred million dollars and ticket sizes are small.

He said "Teachers' has been investing in VC funds for a long time and successfully but there are no co-investment opportunities there," meaning it's hard to scale that activity.

In contrast, Private Equity activities are very scalable because Teachers' has been successfully co-investing for years, allowing it to scale into the asset class while lowering overall fees (co-investments are a form of direct investing where you pay little to no fees).

That is why he likes the Silver Lake-Verily deal. I completely agree but I also asked him, what does Alphabet (Google) get in return? Ziad said: "OTPP brings differentiated capital and our expertise in the healthcare sector, both internal and through our existing partnerships."

I thought that was interesting. He also said they're in dialogue right now with similar corporations where they can bring differentiated capital and expertise to complement the existing platforms.

Interestingly, he cited areas like energy storage, battery storage, climate-smart technology, and mobility, all areas which will be part of disruptive technology for a long time.

He said "Ontario Teachers' has been at the forefront of innovation" since its inception so this new platform will enhance and complement its existing platforms across public and private markets.

I also asked him about Olivia Steedman, an infrastructure expert, and why she was chosen to head up TIP. Ziad told me she's an expert in value creation in infrastructure, working on renewables and greenfield infrastructure projects and she has a lot of international experience working on deals in Chile and elsewhere.

"She's a very talented individual who will kickstart this platform and she will have support from our London and Hong Kong offices to expand its activities," he said.

I ended by asking him how the transition to the CIO chair has been and whether being the CIO of Teachers' is incredibly humbling.

Ziad told me he was "incredibly humbled" when OTPP's board and Ron Mock asked him to be the next CIO and he has a tremendous team, the board and Ron backing him up.

He invited me to meet the next time I'm in Toronto and discuss the global process they put in place to generate high risk-adjusted returns and I definitely look forward to it.

I've never met Ziad but I can tell he is a class act, very sharp, well-mannered and speaks very eloquently. I understand why a lot of people within and outside Teachers' were happy when he was named CIO.

I want to publicly thank Ziad Hindo for taking the time to chat with me today and look forward to meeting him one day.

Below, an introduction to Verily, an independent Alphabet company focused on using technology to better understand health, as well as prevent, detect, and manage disease. This is an amazing clip and I completely agree, we need proactive, not reactive, healthcare and to understand disease at an individual level. The future looks bright and Verily will help shape it.

Also, Jessica Mega, MD, PhD, Chief Medical Officer of Verily and Christina Farr of Fast Company discuss Verily's bold approach to disrupting medicine and healthcare.

In this talk, Dr. Mega talks about how and why she went from a practicing cardiologist to Chief Medical Officer of Google Verily, Verily's strategic partnerships with innovative device companies, the merging of scientific rigor and rapid innovation, and the role of doctors in the new age of digital medicine.

I also embedded a more recent episode of StartUp Health NOW where Dr. Mega talks to Unity Stoakes, president of StartUp Health. They discussed her journey as a doctorpreneur, and how Verily, and other large organizations, are committed to solving big challenges in healthcare.

Fantastic clips, she shares so many great insights that are worth listening to.

Let me end by taking this opportunity to plug a friend of mine, Dr. Themistocles (Tim) Assimes, a board-certified cardiologist and Associate Professor of Medicine at Stanford University's Department of Medicine.

Tim completed his residency in internal medicine as well as a master's degree in Epidemiology and Biostatistics at McGill University and during his fellowship and Instructorship years at Stanford University, he also completed a PhD in Epidemiology and Biostatistics in pharmacoepidemiology.

He's literally one of the smartest and nicest doctors I know, and I know a few. Verily should approach him to sit on its board (not sure he has time), he's a dedicated scientist doing incredible research on the genomic causes of heart attacks and the common conditions that predispose people to heart disease.

He's also collaborating with scientists at the international level by representing Stanford and the affiliated Palo Alto VA in large consortia meta analyzing genetic and genomic data. This is a huge project that requires collaboration and I'm happy Tim is part of it (see clip below).