OTPP's Jo Taylor on Hunting Where Others Don't Tread
Ontario Teachers’ Pension Plan is turning more attention to European markets as other investors remain fixated on the U.S., its chief executive officer said.
“A lot of the Americans at the moment are actually saying, ‘I only want to be in the US,’” Jo Taylor said in an interview with Bloomberg Television on the sidelines of the World Economic Forum in Davos, Switzerland. “To me, that’s great news — I’ll just fill my boots in Europe.”
His bullish remarks on Europe come as the $255.8 billion (US$178 billion) fund searches for new ways to protect capital after pouring significant money into the US. Taylor also sees opportunity in “active private markets” such as infrastructure, private equity and credit.
“I’m a great believer in going to hunt where the others don’t want to tread,” he said.
The Toronto-based pension fund had 17% of its investments in Europe, including the UK, as of the end of 2023. That compares with 35% in the US and 35% in Canada.
Freschia Gonzales of Benefits and Pensions Monitor also reports OTPP shifts focus to Europe as CEO notes US investors' local preference:
Ontario Teachers’ Pension Plan (OTPP) is increasing its focus on European markets as other investors concentrate on the US, according to its Chief Executive Officer Jo Taylor.
Speaking with Bloomberg Television during the World Economic Forum in Davos, Taylor said, “A lot of the Americans at the moment are actually saying, ‘I only want to be in the US.’ To me, that’s great news — I’ll just fill my boots in Europe.”
The Toronto-based pension fund, valued at $255.8bn, is seeking new ways to protect its capital after significant investments in the US.
Taylor highlighted opportunities in ‘active private markets,’ including infrastructure, private equity, and credit. He remarked, “I’m a great believer in going to hunt where the others don’t want to tread.”
In November, OTPP was reportedly considering selling its stakes in five European airports. These include London City, Birmingham, Bristol, Copenhagen, and Brussels.
The Times estimated the assets to be worth more than £10bn.
OTPP's ownership stakes range from 25 percent to 70 percent, making its share potentially worth over £3.5bn.
The prospective sale has prompted minority shareholders to assess their positions, with some considering divestment.
I listened to the entire Bloomberg interview which was short and to the point.
While the title says he's looking at "snapping up European assets," you need to listen carefully to his comments because they are looking to invest in private equity deals where there's scale so they can co-invest in larger transactions.
Nothing earth-shattering or new there, OTPP has been investing in private equity for a long time with top strategic partners, especially in Europe where Jo notes the regulatory framework and currency relative to the loonie are stable (although the CAD-euro cross rate has weakened recently).
More interestingly, he notes that Davos was focused on AI and data centers but at OTPP they remain focused on climate change and are investing in climate transition assets like electricity transmission (last mile delivery where you need power and new types of power).
He also notes beyond that they are moving into "disruptive technology" where they are moving into areas beyond AI like alternative fuels (like hydrogen and other fuels).
They are also very active in venture capital looking at disruptive companies. "We really like technologies that enable other sectors like in healthcare and financial services. We can provide long-term patient capital and in some ways we can be the alternative to an IPO, we can be there for ten years and really help the business to scale."
He ends with some interesting remarks in credit which he thinks is cyclical ("spreads tighten up when everyone is chasing same deals). "In private credit, you really have to be careful you're not putting the same product in the same business, so I wouldn't do private credit with an equity strip in the same company."
He said they look to achieve a balanced portfolio and it's their 35th anniversary this year and he has 340,000 teachers in Ontario and he needs to make sure they're not anxious about their retirement.
Below, this year’s World Economic Forum, OTPP President & CEO, Jo Taylor, sat down with Bloomberg to discuss his outlook for the year ahead, what’s happening across markets, and themes they’re focusing on in their active private markets strategies. These include continuing to invest around the climate transition and embracing disruptive technology, looking beyond AI to transformative technologies that drive change across sectors like financial services and healthcare.
In addition to their significant US investment footprint, diversification is crucial for sustainable growth and balancing their return on risk. Jo highlighted Europe as a strong complement to our North American portfolio, as a region with some good pockets that provide great companies, strong management teams, and the right sort of investment climate. His advice? “Go and hunt where others don’t tread.”
Jo also participated in a panel discussion on the theme of companies staying private for longer, particularly given the growth of private markets globally. He shared his experience from 30 years of investing and how OTPP approaches this, stating: “From our point of view, the question is not just where you see value, but how you create more. A good investment for us means going beyond the original vision when we first got together with the company's management team.”
Third, Tom Lee, Fundstrat managing partner, joins 'Closing Bell' to discuss the market sell-off, his top sector ideas and why he's remaining bullish.
Fourth, the Investment Committee from the Halftime Report debate the risk of the DeepSeek AI news out of China.
Lastly, Chinese AI startup DeepSeek is sending tech stocks plunging as the market digests what its cheaper and more efficient model means for the AI trade. DeepSeek claims it spent only $5.6 million to train its V3 model, compared to the billions spent a year in capital expenditures by the likes of Microsoft and Alphabet. CNBC's Deirdre Bosa sits down with Benchmark General Partner Chetan Puttagunta to discuss how China acheived its AI breakthrough.
Comments
Post a Comment