OTPP infra portfolio beats benchmark as CIO steps down

One day after Ontario Teachers’ announced Neil Petroff would be retiring June 1, the Canadian pension posted strong annual results with its infra portfolio achieving a return of 10.1%.

Ontario Teachers’ Pension Plan (OTPP) posted strong returns for 2014, achieving a 10.1 percent return on its infrastructure portfolio and an 11.8 percent return overall, ending 2014 on a record C$154.5 billion (€113.5 billion; $121.9 billion), the pension fund said in a statement on Tuesday.

Investment earnings for the year were C$16.3 billion up from C$13.7 billion in 2013.

“These strong results were achieved in a turbulent investment environment,” OTPP president and chief executive Ron Mock said. “With continuing low interest rates, intense competition pushing up asset prices, the slide in oil prices and resulting stock-market volatility, 2014 was not an easy year for investment success.”

Still, the pension was able to exceed its benchmark of 5.9 percent for its infrastructure portfolio, which at year-end totalled C$12.6 billion in assets, up from C$11.7 billion in 2013.

As a result of the strong investment returns in 2014, OTPP had a preliminary funding surplus of C$6.8 billion as of January 1, 2015 – the second surplus in as many years, according to the statement.

The results were announced just one day after OTPP said that its chief investment officer Neil Petroff would be retiring on June 1 after serving six years in various positions within the fund’s investment division.

“I’ve been working closely with our chief executive Ron Mock and the investment team on the development of a new investment strategy over the past several months,” Petroff said in a statement. “This is the ideal time for my retirement, and for the next generation of investment professionals to move our new strategy forward.” 

“Neil's decision to retire before the strategy is implemented is simply because he has been planning to retire and did not want to start something he would not see through to the end,” an OTPP spokesperson told Infrastructure Investor. “Therefore, he felt it was best to turn over the keys at the outset of implementation,” the spokesperson added.

While the pension fund declined to comment on the newly-developed investment strategy it did say that an internal and external search will be undertaken for a successor.

If OTPP has not found a replacement by June 1 when Petroff is expected to step down, Mock will assume CIO responsibilities on an interim basis the same spokesperson explained.

Based in Toronto, OTPP is an independent organisation that invests the pension fund’s assets and administers the defined benefit pensions of 311,000 active and retired teachers in Ontario.

The pension fund launched its infrastructure strategy in 2001 and invests across a range of infrastructure sub-sectors, including transportation, energy, water and waste.

Infrastructure falls under OTPP’s real assets category which also includes real estate. At C$34.7 billion, real assets accounted for 22.5 percent of the overall portfolio at the end of 2014, approaching the target of 23 percent, OTPP has set out in its 2014 Statement of Investment Policies and Procedures.