<!-- Swiftype Variables -->

Pension Funds

Ontario Teachers’ CEO in familiar role as search for new CIO continues

CEO Ron Mock says the fund is conducting external and internal searches for a new CIO simultaneously.

Ron Mock is in familiar territory as interim chief investment officer of one of Canada's largest and most dynamic public pension plans at the same time he's also serving as president and CEO.

"It's about having an amazing set of teams," Mr. Mock, who leads the C$189.5 billion (C$148 billion) Ontario Teachers' Pension Plan, Toronto, said in an interview.

Mr. Mock took over CIO duties on April 2 when Bjarne Graven Larsen resigned to return to his native Denmark. It's the second time Mr. Mock has assumed the CIO title at the pension plan on an interim basis, having replaced Neil Petroff, who retired in June 2015, until Mr. Larsen was hired in January 2016.

Also, Mr. Mock has a strong background in alternative investments. Before he was named president and CEO in 2014, he was Ontario Teachers' senior vice president, fixed income and alternative investments.

"The investment division executive team leadership team, they all know me, they've been colleagues with me when I was in the investment division," Mr. Mock said, "and of course, being the CEO at Teachers means you have accountability for large investments that ultimately go to the board for approval. So I'm still very plugged into the investments division and the main strategy of what we're doing across all asset classes and at the total fund level.''

The search for a permanent CIO "is going very, very well," Mr. Mock said, adding that "because it's such an important decision," it's still "a couple months or so" away. "But we're well into it and it's moving forward," he said. "Applications continue to come in unsolicited from all sorts of different spots, so we never say never, but we're well down the road on this process. We are doing internal and external simultaneously."

As the search continues, Ontario Teachers' investment moves have continued unabated. In April, the pension plan announced it acquired a 40% minority stake in European Camping Group, a provider of mobile-homes holiday rentals, from The Carlyle Group and private equity firm Montefiore Investment SAS. Also, OTPP along with other investors led by private equity manager BC Partners LLP acquired the interests of partners in waste management and infrastructure firm GFL Environmental Inc. from HPS Investment Partners LLC, Macquarie Infrastructure Partners III and Hawthorn Equity Partners Inc.

Those deals highlight the importance of selecting the right partners for their deals, particularly in sectors or geographic regions in which Ontario Teachers is less familiar, Mr. Mock said. In fact, he said, the search for the right partners is as important as the search for the right direct investment in the 52 countries in which OTPP has investments.

"The reality is a lot of it is direct private investments or investments through our regional partners, co-investments and/or other partnerships," Mr. Mock said. "We are humble in recognizing that we can't be all things to all people and all knowing. … We are working with groups of people who we will either invest alongside because they're large conglomerate families or invest directly where we feel comfortable, for example in the U.K., France or some of the (Scandinavian) countries. But where we know we don't have the local edge, it's better for us to work with local partners or regional partners.

"Partnership in our global model is critical to what we are into, and we're always on the hunt for really strong, good, credible partners that think like us and have a long-term view," he said.

OTPP also uses the expertise of its partners in some economic sectors, Mr. Mock added. "There may be some funds in the U.S., as an example, that are so well known and so focused on, say, the software sector or the technology sector, where they have the talent and the networks to originate and think through critically important areas. Where we will not build out a huge team that is capable of really focusing in on a sector, we will partner with somebody… We'll go direct in the U.S., the U.K., France and Canada, and all the (Group of Seven) countries where we're very comfortable, except possibly Japan, where we will partner. We definitely will also pick sector specializations in areas where we admit we don't know everything, and therefore that's another circumstance where we will look for deep partner strength."

As of Dec. 31, Ontario Teachers' C$31.9 billion in private equity investments returned an annualized 20.6% over five years, vs. its 17.4% annualized custom benchmark return, according to the plan's website.

One agency with which Ontario Teachers looks forward to having a relationship is the Canada Infrastructure Bank, currently being formed by the Ottawa government. Mr. Mock said the bank is expected to tap the expertise of OTPP and other large Canadian public plans in infrastructure investing. "The Canadian plans, both federal and provincial, the top eight (Canadian plans) are so well known for their infrastructure investments globally," Mr. Mock said. "The Canadian brand globally is well known and well understood. Tapping into the thinking of these large eight plans which aggregate almost C$1.8 trillion, it clearly suggests that Canada's future is being tied to infrastructure, the movement of people, productivity. (The bank) is a great idea to launch."

Ontario Teachers' C$18.7 billion in infrastructure investments returned an annualized 13.3% over five years ended Dec. 31, compared to its custom benchmark's 7.2% annualized return, according to its website.

What investors will need with the bank, as with any infrastructure investment, is patience, Mr. Mock said. "Both Canada and the U.S. are exciting opportunities to look at infrastructure, particularly because of investors like us that have been heavily invested there and have been for almost 15, 16 years," he said. "It's exciting to us, but also with our experience in this, we've learned we have to have a certain level of patience. The wheels of different levels, the projects that get funded and need to be invested in and built out, that takes time, particularly when a lot of the infrastructure demand these days is around greenfield," because of their requirements for state or provincial, municipal and federal approvals. "Where the new infrastructure comes into play is really about the coordination across provinces, states, municipal governments, and also about rights of ways and community impact and environmental studies and everything else."