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Ontario Dreams of Creating Two Mega Pension Funds

Dwight Duncan

Dwight Duncan

The Canadian province of Ontario is debating the development of two mega pension funds to manage the retirement savings of public sector workers. To be clear, no formal policy decisions have been made by Ontario officials. In theory, the two mega funds would manage C$ 60 billion in pension assets, with one managing C$ 46 billion. These proposed funds would rank behind the massive Ontario Teachers’ Pension Plan (OTPP) and the Ontario Municipal Employees Retirement System (OMERS).

Upon hearing the news, some pensioners and labor groups in Ontario are pushing back. Many of the pension plans are underfunded and believe mashing them together won’t fix insolvency issues. In addition, some pensioners may have to contribute more. On the other hand, some people agree that consolidation can work, especially if you look at OMERS and OTPP’s investment returns compared to smaller pensions.

In the past four years, many Canadian public fund investors began modifying investment strategies to cope with a low-yield environment, thus embracing alternatives like real estate, infrastructure, and private equity. Higher interest rates have been scuttled away with easy money policy actions by the European Central Bank and the Federal Reserve.

Pension expenses are exerting unduly strain on government finances.

A pooling of assets, similar to what OMERS and OTPP accomplished could be a model to reduce administrative costs and have stronger purchasing power when it comes to finding investment managers or assets. Investing in real estate and private equity, especially on a direct basis requires substantial in-house capabilities. Smaller public funds do not have the scale to develop these systems, thus relying more on consultants and external managers. In addition, smaller funds in Canada have been slow to make the change, due to the challenge of finding suitable alternative investments and monitoring asset performance.

SWFI First Read, November 19, 2017

Mubadala Petroleum Sees Opportunities in Mexican Upstream and Downstream

Mubadala Petroleum, a unit of Mubadala Investment Company, is studying investment opportunities in Mexico. The opportunity set is both in upstream in oil production, or in downstream sectors. Mubadala recently invested heavily in the Gulf coast.

OMERS-Backed CEDA International Corporation Acquires Joe Loomis Trucking

In 2005, Borealis Infrastructure, a unit of OMERS, had acquired CEDA International Corporation (then known as CEDA Holdings Limited) from Precision Drilling Corporation for C$ 274 million. CEDA International Corporation was moved into the portfolio holdings of OMERS Private Equity, another unit of OMERS. On November 16, 2017, CEDA International Corporation acquired Dawson Creek, British Columbia-based Joe Loomis Trucking Limited.

IMF Believes Kuwait Government Needs $100 Billion Over Next 5 Years for Gross Financing Needs

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Ontario Teachers’ Takes to the Seas with Atlantic Aqua Farms Acquisition

The Ontario Teachers’ Pension Plan (OTPP) has made its first investment in the rising aquaculture industry with the acquisition of Orwell Cove-based Atlantic Aqua Farms, Inc. (AAF) and its affiliated entities from San Francisco-based private equity firm Encore Consumer Capital, through its Encore Consumer Capital Fund L.P., for an undisclosed amount. Estimates of the deal’s value, however, place it at over C$ 100 million. Encore Consumer Capital put AAF for sale back in March 2017.

Based out of Canada’s Prince Edward Island, AAF is the largest grower and processor of the region’s famed blue mussels under the brand names Canadian Cove, Confederation Cove, and J.P.’s shellfish. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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UAE Prepares ADNOC Distribution IPO

The Abu Dhabi National Oil Company (ADNOC) embarked on plans to sell a minority stake of 10% or more in its fuel distribution unit in an initial public offering on the Abu Dhabi Securities Exchange (ADX) scheduled for December of 2017. ADNOC Distribution is the largest fuel distributor in the United Arab Emirates with 67% of the market share by number of retail service stations and benefits from a “stable and predictable” market-pricing regime, according to a company statement.

The offering will consist entirely of existing stock held by ADNOC. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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