Teachers to double infrastructure investments

Pension plan looking at assets with high barrier of entry, like toll roads

One of Canada’s largest publicpension managers, Ontario Teachers’ Pension Plan, aims to double its infrastructure investments within the next five years.

“We are very much focused on the core infrastructure spectrum, but not exclusively,” senior managing director for infrastructure and natural resources Dale Burgess said.

Burgess said he’d like to lift the level of investment in the asset class to $40 billion from currently $17.8 billion, or about eight per cent of the total portfolio.

Overall, the infrastructure and natural resources team has 60 people.

The Toronto-based pension manager is especially interested in assets that have high barriers to entry, the so-called core infrastructure, which usually have inflation protection, and provide a stable cash flow profile to the fund, according to Burgess.

This category would involve airports, toll roads, regulatory utilities and renewable power.

It’s also looking at “core plus” or assets that are adjacent to that core sector that are slightly riskier, be it market risk, technology risk or commodity risk.

Ontario Teachers’ added to its infrastructure bets this year, buying stakes in the operator of thermal energy systems Enwave Energy Corporation in Canada, electricity transmission platform Evoltz Participacoes SA in Brazil and electricity distribution system operator Caruna in Finland.

“We have a very global mindset and a great global perspective, we have a global investment committee, we all sit on it and we evaluate, you know, a toll road in Australia against a toll road in Mexico against a toll road in Europe,” Burgess said.

“We try to compare and contrast, and one of the benefits of infrastructure is that you are looking at a smaller group of assets that, for the most part, have a similar purpose profile and it is easier to make those relative tradeoff comparisons.”

The pension fund is seeing rich valuation of assets across the board.

It’s seeing “a healthy level of competition” for core assets in both developed and emerging markets.

The pension fund is heavily concentrated in airports, including in Birmingham, London, Copenhagen and Brussels, which have been hit hard by the pandemic.