Canada's Large Pension Funds Expanding in APAC Region

 

Lucas Cacioli of AsianInvestor reports India’s markets a priority target for Ontario Teachers' and CDPQ:

Ontario Teachers’ has become the third Canadian pension fund and the sixth foreign state-owned investor to set up shop in India — targeting the region’s infrastructure, equities and capital market opportunities.

“India is an attractive investment destination with a large and growing economy. We have been investing in India for more than a decade and hold a portfolio of public and private assets totaling more than C$3 billion (INR 18,374 crore) across equities, infrastructure, and capital markets,” Ben Chan, executive managing director, Asia Pacific for the Ontario Teachers' Pension Plan told AsianInvestor.

Despite already being active in the region, the Canadian pension fund with $178.5 billion (C$242.5 billion) in assets under management announced the opening of its Mumbai office on September 27 to improve its origination of deals and better establish local partnerships through an on-the-ground team.

“The office further enhances our existing capabilities in the Asia-Pacific region. Ontario Teachers’ has more than 65 employees and approximately $20 billion invested in Asia-Pacific across asset classes,” said Chan.

India is a large, growing and dynamic economy that offers diverse opportunities across asset classes, said Chan.  

“It is one of the key growth markets we are focused on as part of our strategy to reach C$300 billion in assets by 2030,” he said.

“We will target investments in India across all asset classes, including public and private equities, infrastructure, real estate, credit and venture and growth equity.”

In its official announcement, Ontario Teachers’ named Deepak Dara as senior managing director and head of India and will take on this role in early 2023.

“Deepak brings a wealth of experience to the role. In particular, he has played a key role in advancing our India strategy, ambitions on climate action and five-year investment strategy. He will also be the culture carrier in the new office and be able to facilitate connectivity with our other offices given his prior experience in the CIO Office,” said Chan.

RISING FOREIGN INTEREST

The Ontario Teachers' has joined its fellow Canadian public pension funds CPP Investments and Caisse de dépôt et placement du Québec (CDPQ) in establishing a local team in India. Other foreign state-owned investors with a base of operations in the emerging market heavyweight include Singapore’s Temasek, Malaysia’s Khazanah and Singapore’s GIC.

In 2016, CDPQ opened its office in New Delhi, the largest economic and financial centre in the country’s northern region and India`s national capital.

“Our team on the ground has deep knowledge of the market and works with the best local partners – with a focus on infrastructure and renewable energy – and we have grown our presence to $7 billion of investments in the country as of December 31, 2021,” a representative from CDPQ told AsianInvestor.

Infrastructure has been the main target for sovereign investors seeking opportunities in India with more than $19.4 billion having been allocated to the asset class since 2016.

GIC is the leading state investor into India’s infrastructure and has contributed 23% of the total foreign capital, followed by CPP Investments with 15%, CDPQ with 10%, the Abu Dhabi Investment Authority at 8%, Dubai World with 8%, PSP Investments at 6%, and Temasek and the Ontario Teacher’s both contributing 5% each, according to data from Global SWF.

CDPQ is the fourth biggest state investor into India’s infrastructure, and sees the region as a priority market given its long-term growth potential driven by factors including a favorable demographic outlook and strong entrepreneurial culture, said the fund’s spokesperson.

“These factors combined with a demand for sustainable infrastructure where we are a world leader with over 20 years of experience,” they said.

The Quebec-based fund with $288.4 billion (C$392 billion) in assets under management has also been making a deliberate push to grow CDPQ’s portfolio in key sectors such as digital infrastructure, mobility and the energy transition across Asia Pacific and India is a huge part of this push.

“These investments represent our constructive capital approach – which helps determine the partners we choose, the industries we focus on and the companies we ultimately invest in,” said the spokesperson.

“We operate with a constructive mindset because it is the best and safest path to the steady, reliable returns that long-term capital needs and we see India – and the broader APAC region – as countries with many exciting opportunities,” they said.

I recently covered Ontario Teachers' opening of its Mumbai office and why it is looking to expand its investments in India. 

Bloomberg reports Teachers' is also planning to double headcount in Singapore for its Asia expansion:

The Ontario Teachers’ Pension Plan is looking to potentially double staff in its Singapore office as the C$243 billion (US$177 billion) Canadian fund steps up its expansion in Asia.

The Toronto-based investor is moving into new offices in the city state next year with capacity for about 45 to 50 people, from about 25 now. That would surpass the 35 staff in the fund’s Hong Kong office.

“We are planning to be able,” to double headcount in Singapore, said President and Chief Executive Officer Jo Taylor. “You know what happens when you open a nice new office, they tend to get filled.”

Ontario Teachers’ joins other Canadian pension funds adding staff and deploying more capital to Asia. The Ontario Municipal Employees Retirement System aims to triple assets in the region over the next eight years from C$13 billion now, President and CEO Blake Hutcheson said at the Milken Institute Asia Summit on Thursday. The Caisse de depot et placement du Quebec plans to invest C$15 billion over five years, the Business Times reported.

The Singapore expansion will allow Ontario Teachers’ to invest in a wider range of assets as it builds on its C$20 billion exposure to the region. Both the firm’s real estate unit, Cadillac Fairview, and the infrastructure team already have staff in the Southeast Asian nation.

“Singapore gives us another dimension in terms of dealing with Southeast Asia and Australia,” said Taylor, in an interview Friday from the Singapore office, which was opened in 2020. “It’s clearly a vibrant financial hub with lots of really helpful co-investors and financial advisers.”

Taylor said the fund has no hard target for its Asian assets, though it will naturally grow as it looks to deploy about half of new investments outside North America. Traditionally, the fund has held about 70 per cent of assets in Canada and the US.

“If we doubled our exposure would that be fine, probably yes,” said Taylor, who was in Mumbai this week opening a new office in India.

Hong Kong will remain a base for the fund’s investments in the Greater China area, said Ben Chan, executive managing director for Asia-Pacific.

“We have seen movement from Hong Kong to Singapore for some financial services,” Chan said in the same interview. “For us, if we are going to be active in Southeast Asia and Australia, then naturally the place to be is here.”

Ontario Teachers’ manages funds for 333,000 retired and working teachers in Canada’s most-populous province. It has set a target to have C$300 billion in net assets by 2030, according to its website.

OMERS' CEO Blake Hutcheson was on a panel at the Milken Institute Asia Summit last week where he said they are aiming to triple their assets in the region within eight years. 

OMERS' real estate subsidiary, Oxford Properties, is invested in the region, expanding its team there, and its infrastructure team owns India’s largest infrastructure investment trust along with CPP Investments and is seeking new opportunities in that country.

CDPQ's CEO Charles Emond recently told Singapore's Business Times they are eyeing infrastructure and real estate opportunities as they look to invest C$15 billion in APAC over 5 years:

CANADIAN pension fund Caisse de dépôt et placement du Québec (CDPQ) is seeing opportunities in infrastructure and real estate in Asia-Pacific, and expects such assets to form the bulk of its investments in the region in the coming years.

The institutional investor – which manages some C$392 billion (S$412 billion) in assets globally – expects to deploy around C$15 billion of additional investment into the region over the next 5 years, chief executive Charles Emond told The Business Times in an interview in Singapore this week.

This builds upon the C$56 billion in assets that CDPQ currently has in the region, an amount nearly double the exposure from 5 years ago and...

Unfortunately, the article is for subscribers only but you get the main message, CDPQ is also looking to significantly increase its assets in the APAC region to C$70 billion+ over the next 5 years and is focusing on infrastructure and real estate opportunities. 

As of now, CDPQ has 11% of its total assets in the APAC region which is close to the 13% it has in Europe. The bulk of its assets remain in the US (44%) and Canada (26%).

Leong Wai Leng is responsible for the regional management of CDPQ Global in Asia Pacific. Based in Singapore, she coordinates all CDPQ activities in the region and ensures optimal positioning and outreach. CDPQ has offices in Singapore, New Delhi, Shanghai and Sydney in Asia Pacific.

CPP Investments remains the biggest investor in the APAC region, with 26% of its total assets in the region (36% in US, 16% in Canada and Europe, see latest annual report).

Henry Ingrouille, Managing Director, Head of APAC Operations, is responsible for CPP Investments’ operations in Asia Pacific and for leading initiatives to support its continued growth in the region. He is based in their Hong Kong office. 

CPP Investments also has a Mumbai office where Hari Krishna, Managing Director, Head of Real Estate India, is responsible for its Real Estate investments in India. The Real Estate group in India focuses on investments alongside top tier partners in key sectors such as office, retail and industrial.

AIMCo recently tapped Singapore instead of Hong Kong to establish its Asia headquarters as it plots an international expansion of its private equity group headed by Peter Teti.

BCI has 5.5% invested in the APAC region (34% in Canada, 39% in the US, 12% in Europe and 10% in Emerging Markets) but it doesn't have an office in Asia. Its real estate subsidiary, QuadReal, has an office in Hong Kong and is very active in the region.  

Yesterday, QuadReal announced the appointment of Juliet Cha as Vice President Research and Strategy, Asia Pacific. Juliet is joining QuadReal’s 12-strong Global Research and Strategy team and will be based in Hong Kong.

She will be reporting to Rosemary Feenan, Executive Vice President, Research, and will be responsible for research and analysis into investment transactions, sector trends and real estate performance across geographies in APAC, supporting QuadReal’s strategy as it grows its portfolio in the region.

PSP Investments has 11% of its portfolio in Asia (US is 39%, Canada is 20%, Europe is 17% and 7% in Oceania) and it has an office in Hong Kong.  

PSP invests 10% of its infrastructure portfolio in Asia and 12% in Oceania. It is a big investor in India's toll roads through its ROADIS platform.

In real estate they have 3% in Asia and 5% in Oceania. Interestingly, in Natural Resources, 53% of their portfolio is in Oceania buying up a lot of Australian farms.

When I look at the expansion in the APAC region, it's clear that Canada's large pension funds are focusing their attention there, placing boots on the ground to develop strong relationships with the right strategic partners. 

Given the immense growth opportunities in the APAC region, it's understandable why this region, especially India, is garnering so much of the attention at Canada's large pension funds. 

The primary focus is on real assets -- Infrastructure and Real Estate -- particularly in renewable energy,  but they are investing across many asset classes, private and public. 

The key for success in the APAC region is the same as with other regions, you need to find the right strategic partners to invest in this region and be successful over the long term.

And to develop the right strategic relationships, you need to have people there to enhance your capabilities.

Below, a webinar discussion which took place a year ago featuring Prateek Maheshwari, Managing Director and Head of Asia, OMERS Infrastructure, Wai Leng Leong, Managing Director and Regional Head of Asia Pacific, CDPQ Global, CDPQ Singapore and Michelle Teo, Managing Editor, DealStreetAsia (Moderator).