Advice From a Canadian Power Player
Ontario Teachers' Pension Plan (OTPP) is responsible for administrating pensions for public school teachers of Ontario. OTPP has over 100 billion in assets, and is up an average of 9.7 percent since it was established in 1990 as an independent organization.
"We went a little bit more aggressively into equities [in 2010] from 40 to 45 percent, now that's quite conservative in general pension terms, but because we are a mature pension plan we have too be careful how much risk we take," Jim Leech, president and CEO of Ontario Teachers' Pension Plan, told CNBC on Wednesday.
"Many of the pension plans [in the U.S.] are using what we think would be an unrealistic discount rate in valuing there liabilities," Leech said.
"We have chosen for the last fifteen or so years to mark our liabilities to market—that's the closet equivalent to our liabilities, and those [bond] rates come out to 5- to- 6 percent," he said.
"In our case, a 1 percent change in that discount rate is 25 billion dollars," Leech said.
Something that differentiates OTPP is how active they are in private equity.
"We've been direct investing for almost twenty years now and have built that expertise up over time...we've got the track record, we've got the experience and self-confidence to do it," he said.
Many may recall OTPP's potential buyout of Canada's biggest telecommunications company, BCE, a number of years ago. It would've have been the largest of all time, but it didn't happen.
"With regard to BCE I wish we had closed it, and based on the results that BCE has put forward with there new team and board, I think it would've worked out very well for the teachers of Ontario," Leech said.
Leech sees the activity level picking up.
"2009 there was nothing going on, business was basically ground to a halt. 2010 we closed nine new transactions, sold three and the pipeline looks good for 2011," Leech said, adding, "Not the huge mega deals but we're kind of back to 2005, 2004," he said.