OPTrust plans to treble infra exposure

Infrastructure accounted for about 5% of OPTrust’s investments as of the end of last year. But the C$13.3bn Canadian pension fund manager is looking to increase its infrastructure allocation to 15% over the next several years.

The infrastructure portfolio of the Ontario Public Service Employees Union Pension Trust (OPTrust) returned 22.7 percent in 2010, outpacing the overall portfolio return of 13.9 percent.

The Canadian pension manages assets of C$13.3 billion (€9.8 billion; $13.9 billion) across Canadian and global equities, real estate, infrastructure, private equity and fixed income portfolios, according to a statement.

Infrastructure investments accounted for C$648 million, or 4.9 percent of the total fund, as of December 30, 2010, but the fund is looking to increase its infrastructure allocation to 15 percent over the next several years, according to OPTrust chief executive Stephen Griggs.

Griggs estimated that the fund would reach that target in about 3 to 5 years, but added that OPTrust “is building the portfolio on an opportunistic basis” without a defined timeframe for reaching the 15 percent target. Griggs said OPTrust has a team of about 30 dedicated to private equity and infrastructure investments, and is considering both direct investments and investments in third-party funds.

Griggs said infrastructure investments were attractive for their low correlation to public equities and potential inflation protection. “We also see infrastructure as a long-term hold and it’s a very effective match to the long-term pensioners’ needs,” Griggs added.

In 2006, OPTrust made its first infrastructure investment in UK water company Thames Water. Other infrastructure investments include Newfoundland transportation company Oceanex, renewable energy investment firm Firelight Infrastructure Partners, and UK rolling stock company Porterbrook. The fund has also partnered with the Carbon Trust and InfraRed Capital Partners to develop UK onshore wind projects, and has committed to the Electric Infrastructure Alliance of America, which invests in infrastructure assets that can be structured as real estate investment trusts.

OPTrust is targeting infrastructure investments primarily in Europe and North America, according to a  spokesperson. The targeted geographic breakdown is: 40 percent in Europe, 40 percent in North America, and 20 percent in developed Asia and emerging markets.

Beyond infrastructure, OPTrust’s private equity portfolio returned 28.4 percent for 2010, and real estate generated a return of 14.4 percent, according to a statement. The fund, since its inception in 1995, has had a gross annual return of 8.7 percent.