Ontario Teachers’ Pension Plan’s private equity investing has thrived over a quarter-century, with an annualized 20.2% return net of fees for the C$171.4 billion ($132.4 billion) pension fund.
But the returns belie a less-than-glorious start. The Toronto-based pension fund, created in 1990, made its first private equity investment in 1991 — and promptly wrote off the investment as a loss.
Its C$15 million investment in White Rose Crafts and Nursery Sales Ltd. failed to take root, with White Rose declaring bankruptcy the following year.
Still, OTPP continued to look at private equity as a prudent investment. Then-CEO Claude Lamoureux and Robert Bertram, then-chief investment officer, both of whom have retired from the plan, continued to back the strategy despite that first-time loss.
“They believed in internal management and they believed that private equity was a good investment,” said Jane Rowe, senior vice president, private capital, at Ontario Teachers. “They allowed folks to continue to do private equity investing.”
That support bore fruit beginning in 1994, when OTPP acquired a 49% stake in Maple Leaf Gardens Ltd., which included the Toronto Maple Leafs hockey team, for C$44 million. Over the next eight years, MLG was renamed Maple Leaf Sports & Entertainment, the portfolio added stakes in the Toronto Raptors basketball team; Air Canada Center sports arena; Toronto Football Club, a pro soccer team; and the minor league Toronto Marlies hockey team.
During that time, the pension plan ultimately increased its stake in MLSE to 79%. It sold that stake in 2012 to Bell and Rogers Communications for C$1.32 billion.
“This one proved to be exemplary for us,” Ms. Rowe said.
Ms. Rowe, who has been at OTPP since 2010, now oversees a private equity unit that has grown from the initial C$15 million investment in 1991 to a 70-person staff that handled C$28.4 billion in 2015, according to its annual report. Last year, its private equity investments returned 32.3% vs. its 14.7% custom benchmark.
“We’ve come a long way from how we invested 25 years ago,” Ms. Rowe said. “We now work alongside our partners and look for more good partnerships. We also work with our own public equity people” at OTPP “to get a sense of what they think might be out there, of where the opportunities are for us.”
From that early loss, Ms. Rowe said, the ensuing 25 years “has gained us a lot of insight and experience, allowing us to be smart investors.”