OTPP's Gillian Brown and Stephen McLennan on Their Dual CIO Structure
It’s been two years since the Ontario Teachers’ Pension Plan restructured its leadership team, appointing two people to oversee investments — and despite some major changes and challenges in global markets, the so-called dual CIOs haven’t made any knee-jerk reactions.
Rather, the focus for the two has largely been creating liquidity in the C$269.6 billion ($197 billion as of June 30) portfolio.
"We have been quite proactive in terms of generating liquidity on the private asset side, and seen some good success there, particularly in the market," Stephen McLennan CIO-asset allocation, said in an interview. "We're in position now where we would like to deploy into attractive opportunities and continually assess what the right balance is between passive and active to generate active returns."
"We also want to spend a lot of time focusing on the more technical definition of liquidity, how we manage the balance sheet, what we need for margin calls and making sure we have the flexibility in the portfolio across the markets," he said.
McLennan and Gillian Brown, CIO-public and private investments were named CIOs in January 2024 by CEO Jo Taylor. Their appointments split the role previously held by Ziad Hindo (now senior advisor at Bridgewater Associates), separating the responsibilities of the position, and Taylor has dubbed them dual CIOs, each with distinct lanes of responsibility, they said. Among the so-called Maple 8 of Canada's largest public pension funds, OTPP is the only with this structure.
The thinking behind splitting the role was to acknowledge a changing world with more geopolitical conflict, greater focus on inflation and central banks, disjointed activity in markets, and disruption to business models, they said.
Taylor looked into how to "lean into value creation, thinking strategically about those businesses and how we go forward," Brown said in the same interview. "It was existential, almost a bandwith questions to involve CIO operating model."
Brown -- previously head of capital markets, who joined in 1995 -- oversees the public and private investment functions, covering equities, infrastructure and natural resources, venture growth, real estate and capital markets investment departments.
McLennan oversees the overall asset allocation mix, with an eye on total fund performance and management portfolio risk. He's also responsible for the liquidity management, investment allocations and portfolio optimization. McLennan most recently oversaw total fund management comprising the portfolio construction, treasury funding and global trading capabilities, and joined the pension fund in 2003.
Between them, they're running a 475- person investment team. They overlap in a few areas. Two such examples are Europe, Middle East and Africa coverage and Asia Pacific. While both regional teams report to McClellan, they are more active in nature, so in line with Brown's responsibilities, they said. Ass of December 31 2024, 70% of total investments were EMEA and 8% in APAC.
"It's nice for me having a trusted partner," Brown said. Added McLennan: "It's good to have somebody you can trust also deals off challenging -- as well as positive -- circumstances."
Challenging period since appointments as dual CIOs
Although the executives haven't made any "knee-jerk" moves in the portfolio in response to challenging global markets and powers, that's not to say they haven't had a lot to think about.
For McLennan and Brown the US administration that came into power in January 2025 has been top of mind with market movements as President Donald Trump unveiled a raft of tariffs, an example of key consideration. However, the portfolio has been steady in light of that volatility, they said. One-third of the gross investments were in the US as of December 31 2024,
"We need to be on top of that since it has impacted global markets, which impacts all the portfolios. McLennan said. "Areas we have been spending some time on equity markets-- public and private fixed income in terms of both interest rates in the US and globally; currencies and commodities we are trying to digest and think through what the new administration means, not only this year, but for the years to come."
The CIOs have also been cognizant of the need for diversification and when to start looking beyond the US in terms of equity performance that's been dominated by technology stocks.
"Many are talking including ourselves, about diversification? Are we getting full diversification? Given the equity index is driven by a few names, it's a trend that has been beneficial for all investors, particularly non US investors. But is that going to continue forever?" McClellan said. "It doesn't mean that it's going to end, but at some point, there are valuations and other things we should be cognizant of."
The fund achieved a 2.1% net return on investments for the six months ended June 30 with the total fund returns driven by public assets. Its asset mix of June 30 was 37% equity, including public and private equity and venture growth. 24% fixed income, 20% inflation, sensitive assets, commodities, natural resources, inflation edge. 24% real assets, real estate and infrastructure, 30% credit and 10% absolute return strategies, the asset mix includes 28% in funding and other assets such as overlays, the five-year and 10-year annualized net returns were 7.5% and 6.9 % respectively.
Evolving private markets thinking and approaches
OTPP has been looking at where to be a direct investor and to have a more governance and control over private equity holdings, and when to partner with others. The fund's private equity allocation was 21% as of June 30.
"My view is, it doesn't make sense to have really dogmatic approach, and it's more about understanding what we are good at." Brown said. "The partnership question is interesting. Some investors use it to think 'fund- plus-partner'. We want to be humble about where we need more expertise, such as in sectors that require really specialized knowledge. Therefore we pick the right partners to work with on those assets."
OTPP has always had assets that it co-owns without necessarily having a fund relationship, and has also always "had a lot of partners throughout the portfolio; so it's more about making sure we unlock the right ones to find the right tool for the situation," she added.
Within its venture growth portfolio, which had C$10.4 billion in net assets as of December 31 2024, 42% was direct investments in North America-based assets, 21% in direct APAC investments, 13% in direct EMEA investments, and the remaining 24% was in funds.
The fund paused private investment activities in China in early 2023 and more recently, made the difficult decision to close its Hong Kong office. The majority of the staff relocated to Singapore and Asia-Pacific region as a whole remains important. Brown said, with private equity, infrastructure and venture growth teams active in the region.
At the same time, Bloomberg reported that the Hong Kong office was closed as OTPP optimized its footprint in the region, having added Singapore, Mumbai offices. The team in Hong Kong primarily focused on outward markets -- including Australia, Japan, South Korea -- and the spokesperson said activities could be effectively and efficiently served out of Singapore.
Executives have also been talking about where they see growth opportunities. "I think India has become more of a focus for growth in that context, as a market that is still maturing with good depth of capital markets." Brown added.
And while the major portfolio changes haven't been in the cards for the dual CIOs, they have made a key addition to their private markets capabilities amid ever-changing investment pacing and exit environments and the increasing importance of accountability and monitoring. In that context, McLennan and Brown said
In January 2025, OTPP created its portfolio solutions group, a team of 37 people, monitoring and enhancing performance, improving best practice and providing more centralized value creation oversight in a single cross-asset function. About 80% of OTPP's portfolio is actively managed and private markets accounts for a large proportion of that total.
The team is staffed with existing OTPP members, led by Executive Managing Director Kevin Kerr, and works with deal teams on underwriting at point of entry, assists with variations and perspectives, refreshing value creation plans ahead of exits, helps deliver on key performance indicators and gets involved in an asset when it's not performing versus expectation.
"They have been identifying the important areas where we want deeper subject management expertise, for example, talent management, new relationships, capital market access for technology and data opportunities," McClellan said. "In a world where realizations globally have slowed down, (and) we're owning assets for a longer period, we're making sure the holding period gets more attention, not less."
The team also brings an impartial view on assets. "At Teachers', we believe challenge is a healthy thing," Brown said. "People can fall in love with them, with assets that they hold, so it's good to have external person say, is that really a good process, a good holding?"
This is a really great in-depth article which I wanted to share with my readers.
It not only provides a glimpse into the dual-CIO structure at OTPP, how it works, their respective functions, but also how they collaborate with each other and across asset classes, leveraging off external partners and making sure internal teams stick to their value creation plan.
Gillian Brown has been around OTPP for a very long time (since 1995), has worked with some great CIOs (Bob Bertram, Neil Petroff and Ziad Hindo) and she knows her stuff across public and private markets.
Stephen McLennan has also been there since 2003 and he was in charge of total fund management prior to becoming CIO, Asset Allocation. His group has to think more macro and how to extract the most out of the total fund to deliver on their objectives.
The dual CIO structure has been tried before -- at AIMCo where it unfortunately failed-- but in this case, I really think Gillian and Stephen complement each other well and they're making it work.
Jo Taylor isn't an easy boss, he has high expectations from them and other senior executives and so it all has to work or else he"d be the first to pull the plug.
And the Portfolio Solutions team which Kevin Kerr manages is critically important in this process, they really need to realize on value creation, see when dispositions make sense, and work on assets that need to be worked on.
One thing Teachers' does well is leverage off its partners, be it in private equity, venture, hedge funds, infrastructure, real estate to really get a good sense of what is going on in each asset class.
Alright, I'm going to wrap it up there, make sure you read the latest news at OTPP here.
I will soon be covering OTPP's 2025 results and look forward to catching up with Gillian, Stephen and Jo.
Below, the CNBC Investment Committee debate the software sector as Stephanie Link and Malcolm Ethridge makes some moves in the space.
Also, Dan Niles, founder of Niles Investment Management, offers a measured view of the stock sell-off driven by concerns over AI disruption, saying companies perceived as linked to OpenAI were caught up in an unsustainable wave of speculative buying.
I don't know, as I stated last Monday, it's time to nibble on software stocks, I think AI disruption fears are running amok. Also see this great discussion on Instagram on how AI is reshaping software.
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