A Conversation With UPP's CIO Going Over Their 2024 Results
Toronto, ON – University Pension Plan Ontario (UPP) today announced a 10.3% annual net rate of return in 2024, growing net assets to $12.8 billion. The Plan remained fully funded at 102% with a surplus, staying well-equipped to pay members’ pensions today and over the long term.
These results were published in UPP’s 2024 Annual Report, which outlines the Plan’s performance and progress during its third full operating year.
“UPP was created to protect and grow the pension security of our members, and that responsibility guides every decision we make. This past year marked an important step forward—strengthening the foundation that supports our members through strong investment performance, disciplined risk management, and the continued rollout of dedicated member services. As we build on this momentum, we remain firmly focused on delivering the stability, value, and long-term peace of mind our members count on in a rapidly changing world.”
Barbara Zva, UPP’s President and Chief Executive Officer
UPP’s investment program aims to achieve long-term returns that deliver secure and stable pension benefits at a reasonable and predictable cost to members. By balancing the need for strong returns and contribution and benefit stability, UPP’s portfolio is built to navigate short-term market turbulence while continuing to derive long-term value and dependable retirement income.
“Our 2024 investment performance highlights the continued progress we’re making in establishing a strong, well-diversified portfolio aligned with our long-term objectives. By strengthening internal capabilities and refining our asset mix, we are unlocking the benefits of scale—efficiency, diversification, and control. Looking ahead, we will continue to actively manage the portfolio, pursue high-quality opportunities, and maintain a balanced, strategic approach to long-term value creation.”
Aaron Bennett, UPP’s Chief Investment Officer
As a defined benefit pension plan, UPP was designed to serve the university sector in Ontario, providing faculty and staff with secure pension income for life. UPP’s 2024 highlights include:
- Held a 102% funded status with a $0.2 billion surplus[1]
- Achieved a 10.3% annual net rate of return
- Grew net assets by $1.1 billion to $12.8 billion
- Reached $1 billion committed or invested in private assets since 2022
- Added over $250 million in commitments to climate solutions across several asset classes[2]
- Published UPP’s Inequality Stewardship Plan, which seeks to manage the financial impacts of this systemic risk
- Reduced portfolio greenhouse gas (GHG) emissions intensity[3] by 59% from its 2021 baseline, exceeding the 2025 target
- Began a phased launch of a full suite of pension administration services, including a new member and employer service experience and digital resources
- Welcomed new members from two university sector organizations and two universities[4]
- Provided UPP pensioners, survivors, and dependents in pay with an inflation protection increase of 2.03% to the UPP portion of their pensions, effective January 1, 2025[5]
- Recognized by Institutional Connect with its Institutional Investor of the Year and Investment Innovation of the Year awards.
More information about UPP’s 2024 results, including financial statements, can be found in the 2024 Annual Report.
[1] On a smoothed and market value basis.
[2] Climate solutions include assets or entities that are expected to contribute to climate change mitigation and/or facilitate adaptation to its impacts. For more information about how UPP defines climate solutions, please refer to UPP’s Climate Transition Investment Framework.
[3] Measured as tonnes CO2 e/$M invested.
[4] As of January 1, 2025.
[5] Effective January 1, 2025. Pre-conversion inflation protection is based on the prior plan’s indexing formula, which varies by each plan joining UPP.
About UPP
University Pension Plan Ontario (UPP) is a jointly sponsored defined benefit pension open to all Ontario university sector employers and employees. UPP manages $12.8 billion in pension assets and proudly serves over 41,000 members across five universities and 14 sector organizations. The plan invests to deliver secure, stable pension benefits for members today and for generations to come. For more information, please visit myupp.ca and follow UPP on LinkedIn.
Earlier this week, I had a chance to catch up with Aaron Bennett, UPP’s CIO, to go over their 2024 results and more.
Before I get to my discussion with Aaron, I think it's worth going over items from UPP's 2024 Anual Report which is available here.
It's extremely well written and you can skim through it fairly quickly.
First, here is 2024 at a glance, providing you with main highlights, including plan funding highlights:
Next, take the time to read Chair Gale Rubenstein's message:
I note the following:
One of the most significant advances in 2024 was the launch of the first phase of UPP’s new member and employer service offering—a cornerstone in our commitment to delivering a high-quality, member-focused experience. Designed to be accessible, personalized, and secure, the service offering was built with members’ needs at its core, whether they are just starting their careers, actively planning for retirement, or already enjoying their pension. Elements of the offering are being released over time, allowing for thorough testing and member feedback, to ensure accuracy and ease of use.
We were proud to welcome new members from the Association of Professors of the University of Ottawa and the Ontario Confederation of University Faculty Associations in 2024, and to begin 2025 by welcoming members from the Victoria University General Pension Plan and the Trent University staff Plan on January 1. We are pleased that members of the Wilfrid Laurier University Pension Plan officially consented to join UPP, a significant step toward integrating Laurier members into the Plan. The growth in membership and sustained interest in the Plan reflect the broader value UPP brings to the university sector—as a trusted, forward-looking pension partner supporting the long-term financial well-being of all its diverse academic and staff communities.
And read CEO Barbara (Barb) Zvan's message:
I note the following:
As the university sector continues to face financial challenges, we remain steadfast in our purpose, driven by more than ever to build a foundation of pension security that supports not just individuals, but their families and communities.
A personal highlight in 2024 was co-authoring a research study published in the Journal of Alternative Investments on how Canadian pension funds create value. Featuring UPP alongside the country’s largest plans, the study recognized our growing role within the sector and highlighted our unique contributions to the Canadian pension model. In a time of ongoing uncertainty for both the university sector and the broader economy, we’re proud to offer our members the stability of a pension plan built on a globally respected foundation.
And this:
From the outset, we’ve built strong private markets capabilities that diversify our portfolio and provide access to stable, inflation-hedging assets. By the end of 2024, we surpassed $1 billion in UPP-initiated private asset investments—many of which support our $1.2 billion climate solutions target by directing capital toward competitive assets that contribute to climate risk mitigation and/or adaptation, and away from sectors with higher greenhouse gas emissions intensity and lower long-term competitiveness.
At UPP, responsible investing is not a separate strategy. Rather, it is fully embedded in our approach by ensuring we account for material risks that impact our investment portfolio. These considerations are integral to our due diligence, portfolio construction, and active ownership practices, helping us manage risks and uncover opportunities. In 2024, we further strengthened this commitment with the launch of our Inequality Stewardship Plan, which is rooted in the understanding that inequality is a systemic risk to long-term returns. Through targeted engagement and advocacy, this plan promotes globally recognized standards to address key workforce and workplace issues, supporting the resilience and value of companies in our portfolio.
Those foundations Barb is talking about also form the foundations of UPP's strategy:
Again, keep in mind, this organization is only four years old and build solid foundations to be able to properly diversify its portfolio across public and private markets.
It's not just investment capabilities, it's finance, it's legal, it's risk, IT and more.
Speaking of legal, kudos to UPP's General Counsel Christine Chen for winning the Female Trailblazer of the Year (Academia and In-house) award at the 2024 Canadian Law Awards for her outstanding achievements and impact on both UPP and the broader legal community:
All this to underscore that UPP build out the right foundations in all departments to hit the run grounding and if you're wondering what lawyers do at our large and mid-sized pension investment managers, they review a lot of legal documents and make sure co-investments take place in a timely and smooth manner (among many other things).
Alright, let me move on to the message from UPP’s Senior Managing Director, Responsible Investing, Brian Minns:
I note the following:
UPP’s portfolio GHG emissions intensity ended 2024 at 20 tonnes CO2e/$M invested, down 59% from our 2021 baseline, and down 51% from 2023, far exceeding our 2025 target. The decrease was primarily driven by focused asset mix changes in public equities and infrastructure and an increase in global equity valuations coupled with a decline in value of the Canadian dollar against other currencies. Short-term fluctuations driven by market volatility underscore the need for our dual focus on reducing emissions in our portfolio and in the real economy.
We added over $250 million in investment commitments to climate solutions in 2024. These commitments not only provide key portfolio benefits such as inflation protection but also demonstrate that strategic, long-term investments can facilitate climate change mitigation and/or facilitate adaptation to its impacts. Additionally, the market value of our climate solutions increased significantly, primarily due to our new investments. Since 2023, UPP has committed $650 million to climate solutions, making good progress toward our goal to commit $1.2 billion in climate solutions by 2030.
Alright, there's more in the annual report from Omo Akintan, UPP’s Chief People Officer, discussing how UPP fosters the right culture at the organization and Joanna Lohrenz, UPP’s Chief Pension Services Officer, discussing the value of workplace pensions but I can't cover it all here so please take a look at it.
Now, before I cover my discussion with CIO Aaron Bennett, it's worth reading the Q&A with him as he goes over his thoughts:
I note the following:
While near-term market performance is important, building portfolio resilience is crucial for funding pensions over the long term. Since UPP’s inception, our focus has been setting a foundation for long- term success, and we began seeing tangible benefits from these efforts in 2024. We are actively positioning ourselves to navigate market volatility by implementing a range of strategies across key asset classes. Co-investments have led to better portfolio alignment, reduced fees, and enhanced control, with early positive returns from infrastructure investments. By conducting all manager research, selection, monitoring, and asset-liability studies internally, we’ve achieved significant cost savings and heightened portfolio transparency. Even with increased allocations to higher-cost asset classes, UPP-driven negotiations and our focused portfolio strategy have driven reductions in external management fees. Our new fee structures reward partners for exceeding their benchmarks, especially in public equities. These strategic efforts prepare UPP to navigate future challenges and take advantage of emerging opportunities—less than five years into our journey.
Discussion With UPP's CIO Aaron Bennett
Earlier this week, I had a discussion with UPP's CIO Aaron Bennett.
I want to thank him for taking the time to talk to me and also thank Zandra Alexander for setting up this call and sending me material to review beforehand (on a an embargoed basis, of course).
Aaron began by sharing with me the fantastic news that his youngest child graduated from high school and he will be going to Queen's University to study engineering (great university, one of UPP's founding members).
I asked him if he can give me an overview of the results and he responded:
It was another good year, we delivered 10.3% net return in 2024. We saw good results from return enhancing, inflation sensitive assets and that's despite some pressure on the real estate side which I think a lot of people were experiencing and some pressure on interest rate sensitive assets, you saw the term premium come back into bonds and push some of those prices down.
Despite all that, with the positive 10.3% return, that puts us into a fully funded and financially healthy position, we have a little bit of a surplus.
For us in terms of progress that is really important to me -- and you know this as we've been chatting for a while and you know the history but for those who don't -- there's that element that said we started only four years ago. And we started with a fully invested portfolio with different risk profiles and different capabilities and we've been consolidating that. I think we have gotten to a point where we feel really good about where we are at relative to the target asset mix and most importantly with regards to our capabilities.
We are able to build that portfolio that has got that increased resilience, that is taking advantage of co-investments and diversification on absolute return strategies and that is taking risk that is aligned with the risk appetite of our sponsors and is really designed to fund the pensions that we are focused on.
When you think about those key investment capabilities, private markets is big. Since 2022, we've committed over $1 billion to private markets and that's a really nice mix of fund investments as well as co-investments, direct investments that help us get that extra element of lower fees but also intentional portfolio construction.
We are up to six new fund partnerships and eight direct co-investments across all four of the private asset classes.
Now, when you think about a fund that is only four years old, and when I started in September 2021, there's one person the privates team and he had just joined (Peter Martin Larsen, UPP’s Senior Managing Director and Head of Private Markets). I think that's a tremendous accomplishment and something we are really proud of.
Peter was employee number one, he's built a team across all the asset classes with asset management capability in that time, and deployed capital and done co-investments. And as you know, co-investments are not easy, you have to have the processes, the people, the governance, everything set up. You have that team from legal, investment operations, tax internally and rally around and get these things done in six to eight weeks, and get the approval, otherwise you just can't do co-investments.
But the kind of things you can do with that is exciting because it's typically low or no fees and you get to target very specific things and enhance your portfolio construction that is typically hard to do in private markets.
The key point is UPP is a fairly new plan (fours years old which is nothing) and it already has the capabilities to do co-investments and other things to better diversify its portfolio and align it with their target mix and their sponsors' risk appetite.
I noted that UPP has dealt with its legacy portfolio issues and is now shifting its asset mix to the strategic asset mix they are targeting.
Aaron responded:
I think that's broadly fair however I would say there are still some elements within some of the illiquid private asset classes which have shrunk and will continue to shrink as our assets grow and they will roll off in terms of harvest and liquidations. There are still some things in there which aren't totally aligned with what we want to do strategically but not in a way that we are super concerned about or that we don't think we can compensate in other parts of the portfolio.
In an ideal world, we would have started with $10 billion of cash and been able to deploy that from the start. In this case, we inherited a lot of existing partnerships and strategies and on the public side, we have totally restructured that and aligned it with what we are looking for. On the private side, we mostly have and definitely when you look at infrastructure and to a growing extent real estate, those really reflect the strategies we want going forward within those asset classes.
Private Credit and Private Equity are coming along -- a little bit behind there -- and we expect that over time, it will increasingly become aligned with what we are trying to do.
I shifted my attention to UPP's asset mix noting absolute returns were strong again last year and asked Aaron if that's a portable alpha portfolio or is it part of the asset mix (funded):
He responded:
It's part of the asset mix. Other people might describe it as portable alpha but for us, it's a specific part of the asset mix. It's intentionally populated with things that are much less correlated or uncorrelated with other asset classes. Even in the way it's benchmarked -- a cash plus element -- it's not benhmarked to a standard beta benchmark based on equities or some hedge fund index. This is an explicit part of our target asset mix. I wouldn't describe it as portable alpha although some people could. I think the way we think of things, it's a discreet allocation.
I noted at 10% of the total portfolio, let's say they maintain that allocation over time, then if they consistently meet a benchmark (for example) of T-bills + 500 bps, that absolute return program can add 50 basis points of added value to the overall Fund.
Aaron responded:
I think that's fair, that risk premia over T-bills or whatever cash rate you want t use is always open to discussion, it needs to be aligned with the strategies and risk parameters of the portfolio, I think that's fair.
I think for us it adds an additional element because we are mid-sized and we are early in our life. Many of the tools that peers our size or larger would have at the top of the house in terms of risk mitigation or finding things that have crisis alpha or elements like that, we haven't developed those yet and we don't have access to those at the top of the house so in some ways we look at the absolute return portfolio to provide those elements as well, still in keeping with the kind of benchmark framework you describe.
That makes perfect sense, UPP should leverage off its absolute return managers in every respect, including using them for risk mitigation.
I shifted my attention to private markets noting through my discussions with larger peers, it's clear that transaction activity has declined significantly, especially in private equity, and asked him if he can discuss what he sees in real assets (infrastructure and real estate) before we get to private equity and private credit.
He responded:
Let's talk about infrastructure and real estate. I would say for us, we are in a slightly different position than our peers when it comes to infrastructure and real estate and that's because we started with a low allocation relative to our target allocation. So we were actively looking to deploy capital (in these two asset classes). I think many of our other peers were close to to their allocation, perhaps a little bit above and they were more constrained.
I do think to your point, overall transactions in the marketplace, I think there were fewer especially in real estate, although on the infrastructure side, we found a lot of interesting opportunities. There were fewer transactions than we've seen in the past, less of a mid-market problem end of things. For us, we found a lot more opportunities than I think we expected that fit the profile we are looking for. We were very active on new fund commitments and co-investments.
Real estate I'd say is still struggling a little bit with the commercial real estate market and the presence of that and how much capital is has attracted in the past, the influence of that over the entire real estate market. We have found a number of interesting opportunities there and we've been working on them.
I would say across the board in real estate, to your point, there are fewer actionable opportunities than we've seen in the past although we did see some momentum towards the end of the year where we did see an increased flow of opportunities that looked interesting which suggested that as interest rates came down, as people started to digest some of that valuations in commercial real estate, you saw some transactions in office and retail. I think that starts to unlock the market in real estate.
So we are looking for more opportunities going forward especially in some of our target areas around multi-residential, industrial and in some niche things like life sciences and student housing as well.
I noted that the returns on real estate were negative two years in a row (-4.6% in 2023 and -6.7% in 2025) and asked Aaron whether it's fair to say there are still some legacy assets in that portfolio (which they inherited) dragging returns down, specifically the portfolio there was too heavily titled toward offices and retail forcing them to take writedowns last year and the prior year.
He responded:
I think that's a fair comment. We took on a reasonably diversified exposure across a number of different funds -- no direct investments or co-investments of any kind. We did have some significant exposure in office and to a lesser extent to retail. And that's the primary driver of what you've seen in terms of the performance over the last couple of years.
I interjected and asked if geographically the exposure is mostly in North America and he went on:
Yes, in general both the portfolio we took on and our intention going forward is is certainly developed market and certainly the portfolio we took on would be much more heavily weighted to North America. So yes, North America overall and pretty balanced between Canada and the US with a bit of a bias in the US.
I noted going forward as they deploy more capital into multi-residential and industrial, the diversification effect will kick in and boost overall returns in that portfolio.
Aaron replied:
It will take a bit of time as opportunities present themselves because we are being very selective. We've got a lot of dry powder and think there will be some interesting opportunities. We will ramp it up over time. There will be a J-curve to get around, co-investments will help on that front, particularly when we do some co-investments outside the development side of things and that will help us get there.
The intent is we want to focus on developed markets and I can tell you right now, we are looking at things in both North America and Western Europe.
I asked him if in infrastructure there's a sector they like more especially in energy transition.
He replied:
We are big fans of the energy transition although there is certainly some uncertainty injected into what that looks like in the US for the immediate future. We think that's created opportunities elsewhere. We are looking there, we are also looking at what's going on in the US because as assets price in the new environment there, there may be opportunities to take a longer term view as well and to capture some return.
So energy transition, yes, but also very much focused on the total transition and thinking how does this work. It's not just about wind farms and solar farms, it's also thinking about some things associated with the infrastructure, the grid, and some of the things required to integrate all these different types of energy into the grid in a way that promotes resilience and stability of the grid so you don't see rolling brownouts and prolonged blackouts and things like that.
We also really like core transportation and we think there's a lot of really interesting mid-market infrastructure elements as well. That included things around digital infrastructure where you think about things like data centers and to some extent fiber and towers although we're careful about valuations and opportunities on that front. But we've seen some really interesting opportunities in terms of that crossover between energy and power side of things and digital infrastructure. You get those in the more diversified infrastructure mid-market partners and that can be really interesting as well.
Next, I shifted my attention to Private Equity and asked Aaron to give me some insights on where they are at.
Aaron responded:
Private Equity is one of the portfolios where we really just started implementing our strategy, although really excited around how we started there. We inherited a portfolio that had a wide range of things, on balance tilted towards growth, and that's something that certainly has paid dividends over the long term, has been a tough area to be in over the recent period.
Where we focused our strategy from the get-go was in mid-market buyouts in developed markets because we though there is some significant opportunity, created some nice support and complementary to the overall private equity portfolio and we think there's alpha opportunities there to capture.
We struck one new partnership there and we've done two co-investments with them in addition to the fund and we are looking at other opportunities there.
That was an opportunistic thing that popped up and I'd say our approach to both Private Equity and Private Debt is opportunistic because of the existing exposure and we need to see that roll off.
But we are very happy with what we were able to accomplish and the early performance that we're seeing out of the co-investments are quite exciting and position us well over the long term.
I noted that Private Equity returns at UPP are anemic compared to large and small peers and wanted to understand if that's due to legacy issues that persist in that portfolio, including the growth aspect that helped over the long run but has been challenged last couple of years..
Aaron responded:
I would say that (PE) portfolio is dominated by strategies we took on, so it's a fair assessment. But to also be fair, you don't look at these things on a one or two year basis, you look at private equity on a 10-year basis and if you looked at it over that longer time, I think there have been significant returns from these portfolios in the past and they served members well. We're just in a period where growth equity and things of that nature are not doing well, they're struggling and we're certainly feeling that in that portfolio.
I noted that there may be some serious structural headwinds in private equity, especially if rates remain higher for longer, where perhaps the good years are behind us and asked him his insights.
He responded:
Interesting question. I'm still a firm believer that there are diversifying and differentiated alpha opportunities in here for value creation. I do not agree with the concept that you just have to be in private equity and you'll get those, you don't have to be selective about the manager, the co-investments and kind of investments you do. I don't think that's true anymore. I think the easy money or beta in private equity has gotten a lot harder to capture so you really have to focus on finding partners and investments where the focus on value creation is at the business level rather than arbitraging the margins or arbitraging the multiples in the M&A market or other forms of financial engineering because as you said, interest rates are up, money is no longer free so the skill required to extract that value over time is higher. Still think there are differentiating opportunities but it is a more challenging environment for private equity more broadly and that's why we are being opportunistic as opposed to trying to capture exposure to fill up that bucket so to speak.
I asked him about Private Debt where he shared this with me:
Private Debt is a little bit like Private Equity where we inherited a significant portfolio which had committed unfunded capital as well so we had to figure that out from a liquidity perspective. It was a much more diverse portfolio across the spectrum in private credit. Some portfolios you'll see are much more focused on direct lending and sponsored backed lending, that not really true of the portfolio we took on so that gave us scope along with some restructuring we did in terms of getting out of open ended funds. It allowed us to be more opportunistic but actually more active and really deploy more of our capital.
The first thing we did in Private Debt was a co-investment which is exciting because it's great to start life with capital deployed at low or no fees and no carry, so that set us up quite nicely. And that was in asset backed financing. We are actually seeing more interesting opportunities in that. As I look at the kinds of things we are looking at now in 2025, that continues from a pipeline the team built in 2024 very much focused in developed market asset backed lending both in Western Europe as well as North America.
Lastly, I asked Aaron how they're navigating the extreme volatility in markets and how do they structure a resilient portfolio in this environment.
He responded:
A couple of things. There's a lot of volatility, not a lot of direction. That's a challenging environment to be in and a challenging environment to position a portfolio in. And one where you're seeing a different pattern of returns and risks than you're used to. So things like the correlation between stocks and bonds, that's going through some changes, whether that's permanent or not, I don't know. You're looking at currencies and they have started to do some really interesting things as well.
All of this makes me think of two important things. One, at the top of the house,being in a position and keeping liquid and being very prudent in how you use leverage, so you're in a position to do the right thing at right time and you're not pushed into a corner to do the wrong thing. We spent a lot of time early on developing that and we are spending more time thinking about that and adding that into what we've been able to build. We've implemented a risk system that is giving us greater insights on some of the volatility and liquidity and enables us to model different scenarios.
So maintaining that higher level of liquidity until you find that opportunity and that's the second part, there's lots of uncertainty here and it's changing every day. that uncertainty for along term investor is going to create opportunities in other areas so where are those opportunities? And you think about everything that's going on in the US and what does that make you think about. It makes me think ok, where are the opportunities being created by all this/
I was just in Europe last week and I can tell you, there's a galvanization. In certain parts of Western Europe they're taking what used to be politically impossible but economically sensible steps to all of a sudden say ok, it's a crisis, now it's politically possible and economically sensible, we are going to do this. And I think some of the opportunities being created there are really exciting.
I hope for the same things out of our own country, Canada, so making sure you are engaged and looking for opportunities while you're still managing risk and have the capacity to take advantage of those long term opportunities.
Because it's going to be one of those periods, how you manage through this, the investments that you make during this period, these can be the things that really set you up for the next decade as a fund.
We ended it off on that somewhat optimistic note and I want to thank Aaron Bennett once again for sharing so many great insights with my readers.
I also want to congratulate him for being selected as one of The Globe and Mail’s Report on Business Magazine’s 2025 Best Executives.
Alright, let me wrap it up there, it was another busy day where time flew by.
Below, Aaron Bennett, Chief Investment Officer at University Pension Plan Ontario (UPP) shares his experience of #BuildingBridges23 and his insights on sustainable finance.
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