With the dismal performance of the stock market, pension funds are turning to all sorts of alternative investments to increase their rates of return. And the Ontario Teachers' Pension Plan, Toronto, has a reputation for innovation, blazing paths others later follow.
The fund recently became the majority owner of Maple Leaf Sports & Entertainment, the entity that owns the Toronto Maple Leafs hockey team and the Toronto Raptors basketball team, along with Air Canada Centre and the Maple Leaf Gardens arena. The C$68 billion (U.S.$45 billion) pension fund now owns 58% of the sports franchises and their stadiums, after making its initial investment in the Maple Leafs in 1994 and then investing in the Raptors team, which entered the National Basketball Association in 1995.
"It's a good investment for the pension fund, and it meets the criteria of our merchant bank," which is for a return of about 25% a year, said Bob Bertram, executive vice president, investments.
As majority owner, the pension fund gets to fill three of nine seats on the organization's board of directors. But it doesn't get involved in management decisions for the sports teams such as trading players or team playing strategy, according to Mr. Bertram. "We have a sports management team that handles all of that," he said.
There are perks involved with owning a sports franchise, though. The pension fund has choice "directors seats" at all the games, which it uses for business activities, according to Mr. Bertram, although he buys his own seats for the teams' games because he and his children are huge fans.
You might expect a hockey team in Canada to draw huge crowds, as the Maple Leafs do. But the Raptors - which have a record of 14 wins and 34 losses as of Feb. 11, 2003 - do pretty well too, with the fifth best attendance in the NBA.