OTPP infra portfolio ‘significantly outperformed’ in 2011

The portfolio returned 13% in 2010, beating its 4% benchmark by 9%, or C$600m. The Canadian pension’s infrastructure assets are now valued at C$7.1bn, thanks in part to its acquisition of the HS1 rail link in the UK in November.

The Ontario Teachers Pension Plan, one of the oldest and largest direct pension investors in infrastructure, is boasting “significant” outperformance on its portfolio, which raked in a 13 percent return against a 4 percent benchmark in 2010.

High-speed rail:
OTPP's infra

The Toronto-based pension said in its annual report that the 9 percentage point outperformance equated to a C$600 million (€437 million; $620 million) gain above the benchmark for the infrastructure portfolio in 2010. The overall portfolio turned in a 14.3 percent performance for the year, beating its benchmark by 4.5 percent, or about C$4 billion.

The pension’s total portfolio is valued at C$107.5 billion, versus C$96.4 billion at the end of last year. OTPP valued the infrastructure portion of the portfolio at C$7.1 billion at the end of 2010, or about 6.6 percent, versus C$5.6 billion the year before.

The pension’s acquisition of a 30-year concession for the UK’s HS1 rail link was a major mover for its infrastructure portfolio in 2010, according to a spokesperson. OTPP and Borealis, the infrastructure investment arm of the Ontario Municipal Employees’ Retirement System, another big Canadian pension, won the concession for £2.1 billion (€2.4 billion, $3.4 billion) in November.

The spokesperson declined to name OTPP’s equity contribution to the deal, but a source familiar with the deal’s financing previously told Infrastructure Investor that £1.3 billion of the £2.1 billion financing was debt. The two pensions were 50-50 partners on the bid, according to the spokesperson.

Overall, OTPP said its infrastructure portfolio “significantly outperformed” in 2010, despite headwinds from “certain foreign currencies” which “dampened both returns and the asset class benchmark” because of the Canadian dollars strengthening throughout the year.

The pension’s infrastructure portfolio is located almost entirely outside of Canada, meaning it has greater exposure to currency fluctuations than other asset classes in which the pension has a greater presence within its home market. A port terminal in Vancouver, the British Columbia capital, owned by OTPP infrastructure portfolio company, GCT Global Container Terminals, is the sole Canadian asset.

Other infrastructure businesses owned by OTPP include Birmingham International Airport in the UK, Southern Cross Airports Corporation Holdings, the parent company of Sydney Airport, and UK pipeline operator Scotia Gas Networks, among others.