OPTrust Joins Canada Pension Peers Bringing Trading In-House

Posted: January 10, 2017
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Source: Maciej Onoszko, Bloomberg News

Canadian pension plan OPTrust is catching up with its bigger domestic peers by setting up a trading floor and adding as many as 10 portfolio managers to oversee about half of its C$18.4 billion ($13.9 billion) of assets in-house.

The move to internalize oversight of foreign-exchange, fixed-income and derivatives strategies is meant to improve the pension plan’s risk management by getting "closer to the coal face," said James Davis, OPTrust’s chief investment officer, who’s handling the transition. The fund, ranked 18th by assets in Canada according to a research of pension funds by London-based Willis Towers Watson Plc, currently has external firms managing its market assets.

"We’re a maturing pension plan and in that environment, our tolerance for risk isn’t as great as a pension plan that is younger," Davis told Bloomberg News in an interview from his office in Toronto. “Having direct access to the market allows us to manage risk in a far more agile way.”

Canada’s pension funds have led the world with their active approach to investing, buying real assets, as well as using sophisticated financial instruments and leverage. OPTrust’s effort to take more matters into its own hands, with the first trade expected in the second quarter of this year, is an “evolutionary” move for the fund, according to Davis.