The head of one of North America’s biggest investors in private markets wants to cut its reliance on buyout firms and do more deal-making on his own.
Jo Taylor, chief executive officer of Ontario Teachers’ Pension Plan, Toronto, has plans for the C$242 billion ($189 billion) fund to buy more controlling stakes in businesses directly, so that it can save on fees and keep a closer eye on environmental, social and governance matters.
In a rare interview, Mr. Taylor said OTPP is looking more closely at both the returns its private equity portfolio generates, and whether it can have “sufficient influence” at the companies it invests in.
“One of the advantages of being in a control position is that you can actually have a consistent view of how we interact with the businesses,” he said. “That’s quite hard to do when you have 5% to 10% in somebody else’s private equity deal.”
Pension funds have been upping pressure on asset managers to apply more ESG awareness when investing their money, keen to show they’re not just paying lip service to issues like climate change and social mobility. OTPP has put these topics high on the agenda when dealing directly with companies, according to Mr. Taylor.
“We have come out with very clear climate reduction targets,” he said. “We come out with very clear diversity, equity and inclusion targets in terms of gender participation on boards and how generally governance works around the businesses that we invest in.”
OTPP manages the retirement pots of teachers in Ontario. Net assets rose 10% in 2021, a year in which the fund stepped up efforts to buy controlling stakes. Notable deals in Europe included acquiring a majority holding in plastic packaging producer Logoplaste and 30% of insurance broker Siaci Saint Honore.
OTPP’s top executives say returns for 2022 may struggle to hit last year’s levels in a more challenging economic environment of rising inflation, rates and market sell-offs.
“Hopefully there’s enough return in our real assets and inflation hedge portfolio to compensate for potential losses elsewhere,” said Chief Investment Officer Ziad Hindo.