Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. PENSION FUNDS
September 30, 2019 12:00 AM

Emerging markets are notable growth drivers for Canadian funds

Danielle Walker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Jo Taylor
    Jo Taylor said emerging markets investments are in several asset classes.

    Canada's largest public pension funds are pushing further into emerging markets, particularly Asia and Latin America, through a range of efforts that include boosting target allocations to the asset class, looking for ways to partner on new deals and bringing in additional staff with expertise in the area.

    The C$201.4 billion ($151.6 billion) Ontario Teachers' Pension Plan is "investing significantly" in the asset class, especially in Asia, said Jo Taylor, executive managing director, global development. Its exposure to emerging markets fluctuates between 10% and 20% of the total pension fund, Mr. Taylor said.

    "We will be recruiting a number of individuals across the region and also be making sure we continue to have a targeted focus in Latin America," he said. This will include looking for opportunities in equities, infrastructure and real estate in Brazil, Colombia, Peru, Chile and Mexico, he added.

    The pension fund's exposure to emerging markets cuts across its fixed income, infra- structure, and public and private equity portfolios, said Mr. Taylor, who will become president and CEO of the Ontario fund on Jan. 1.

    Over the next few years, Ontario Teachers, which has its headquarters in Toronto plus offices in Hong Kong and London, plans to double the number of its investment staff in Asia, which is currently about 30, Mr. Taylor said.

    "One of the deliberations we are having is will all staff be in one office (in Hong Kong) or is there a need to have offices in other areas?" he said.

    Currently, much of the pension fund's Asian portfolio is in equities, both private and publicly listed companies, Mr. Taylor said.


    Not the only megaplan

    The Ontario fund is not the only megaplan in Canada targeting emerging markets for new investment opportunities. By 2025, the Canada Pension Plan Investment Board, Toronto, which had C$400.6 billion in assets as of June 30, expects to have up to one-third of its fund in emerging markets such as China, India and Latin America, said Alain Carrier, senior managing director and head of international, in an email.

    The plan announced the move earlier this year in its annual report.

    Looking forward, CPPIB sees emerging markets opportunities in both equity and debt, Mr. Carrier wrote.

    CPPIB estimates the share of global gross domestic product represented by emerging markets will reach 47% by 2025 and surpass the GDP of developed economies by 2029.

    "Based on this growth trajectory, we feel there are attractive returns available over the long term to those investors who take the time to study the characteristics and fundamentals of these markets and are able to identify trends and opportunities in those markets," Mr. Carrier wrote. There is also the benefit of diversification into different geographies and asset classes for the fund, he added.

    Of note, China's share of global GDP is about 16%, but as of the end of 2018, the country accounted for less than 4% of global equity benchmarks and near zero of global fixed-income benchmarks, said a March research report by investment consultant Cambridge Associates LLC, Boston.

    "Rather than reflecting the size of China's domestic markets, this gap reflects limits on foreign investor access, as well as issues regarding free float and liquidity," said the report, written by Aaron Costello, managing director, regional head for Asia.

    Although ongoing trade disputes between the U.S. and China might give some investors pause, the longer-term view for China presents investment opportunities as "incomes are rising, consumers are upgrading their spending habits and innovation is playing a larger role in China's growth," said a September report by Matthews International Capital Management LLC, San Francisco, an Asia investment specialist with $27.3 billion in assets under management that goes by Matthews Asia.


    Rising tensions

    In the U.S., however, tensions rose last week. Trump administration officials reportedly are considering ways to limit investors' portfolio flows into China, according to a Bloomberg News report on Sept. 27, citing anonymous sources. Some methods being discussed are delisting Chinese companies from U.S. stock exchanges and limiting exposure to China through government pension funds, the report said.

    New York-based Christoph Hofmann, the global head of distribution at emerging markets specialist Ashmore Group PLC, believes there is a "huge dislocation" between what emerging markets are contributing in terms of global GDP and where institutional investors are putting their money.

    Emerging market bonds in particular might be attractive as an alternative for income-seeking investors, as most developed market bonds are trading at "very low or negative yields," Mr. Hofmann said.

    Mr. Hofmann said the biggest challenge some equity investors face is that exposure to emerging markets is not very nuanced.

    "Owning Samsung (Electronics Co.), which is a South Korean company and therefore an emerging markets stock, may or may not be a good investment idea, but it will give you significant exposure to U.S. consumer behavior. … You're not really getting exposure to the actual economic activity in Korea," he said.

    Additionally, some investors are "leaving a lot of opportunity set on the table by not investing in frontier markets or small-cap names in emerging markets," Mr. Hofmann added.

    The C$326.7 billion Caisse de Depot et Placement du Quebec, Montreal, has 14% of total assets in emerging markets through investments in fixed income, listed equities, infrastructure and real estate, according to Anita M. George, executive vice president and head of strategic partnerships, growth markets.


    Works with partners

    CDPQ has external emerging markets managers and works with partners such as local sponsors and entrepreneurs. But the pension fund also, and has increasingly, managed emerging markets investments in-house, Ms. George noted.

    "We continue to do more business," Ms. George said of the fund's overall investments in emerging markets.

    "We do plan to do more, but we don't set targets for ourselves. That's not our approach. Our approach is to find the right partners in those sectors that we want to be active in," she said.

    Ms. George, who leads the emerging markets team of about 20 dedicated investment staff, said the pension fund also sees opportunities in China and Latin America.

    China "has a large number of listed equities, so we are active (there)," she said. In Latin America, there are more opportunities in infrastructure and real estate investments.

    Related Articles
    Canada sustainable finance panel lays out plan for linking climate objectives to investment plans
    Canadian funds eye pooling assets to access alternatives
    Canadian money managers say biggest challenge is clients expecting more – survey
    Recommended for You
    Columns in front of the Alaska State Capitol building in Juneau.
    Alaska House votes to reopen state pension plans; bill sent to Senate
    Pope Leo XIV looking off in the distance.
    How U.S. Conference of Catholic Bishops exorcised American church's pension problems
    Grace Reyes, left, Stephen Gilmore and Scott Chan sit on a panel at the Catalyst forum.
    CalPERS, CalSTRS CIOs discuss portfolio resiliency amid market uncertainty, DEI pushback
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print