The Ontario Teachers’ Pension Plan wants to significantly increase its infrastructure investments in India and will explore similar opportunities in Southeast Asia using its Singapore office as a base for its development. expand in the region.
Ontario Teachers’, which manages approximately $188.3 billion in assets for its pension fund members, opened its Singapore office – its second location in Asia after Hong Kong – in 2020 to enable its teams to ‘Infrastructure and Real Estate and Equities to more effectively cover major markets in India, South East Asia, Australia and New Zealand.
Before the Singapore office opened, infrastructure investment in Asia was conducted from its Toronto headquarters, said its managing director for infrastructure and natural resources in Asia-Pacific, Bruce Crane. Asian investor.
“We had more of a back and forth approach, so the idea was that if we’re going to put more dollars into the region, let’s make sure we do it with a team on the ground,” he said.
India will continue to be Ontario Teachers’ main target in Asia. On April 20, the Canadian pension fund announced that it had pledged to invest up to $175 million in KKR’s road platform in India, which includes Motorway Concessions One.
The development marks Ontario Teachers’ third infrastructure investment in India, following its investment of a 25% stake in National Highways Infra Trust late last year. The Canadian pension fund is also an anchor investor in India’s National Investment and Infrastructure Fund.
When it comes to investments in Asia, Crane says the fund has two key objectives: to increase the diversification of its portfolio and to achieve an allocation for better growth. Among emerging markets in Asia, he is convinced that India offers more opportunities for foreign investors.
“In Southeast Asia, we will generally only look at investment grade countries, so besides India, this will really only include Singapore, Indonesia, the Philippines, Thailand and Malaysia,” said he declared. “Of this group, we are not going to call Singapore an emerging market.”
Among the group described by Crane, he said that next to India, Indonesia and the Philippines are probably the two most relevant markets, but neither has the depth of opportunity from a foreign capital perspective. .
“The reason many investors like us spend more time in India is that it has a much larger pipeline, and its need and acceptance of foreign capital is much greater. They’re just better structured to allow investors like us to come in and invest money the way we need to,” he said.
“That doesn’t mean other Southeast Asian markets don’t have these opportunities, but when you consider the likelihood of success and where to allocate time and money, India has the priority on Southeast Asia.”
Teachers’ is not the only major asset owner committing capital to India’s rapidly growing infrastructure. On April 11, the Canada Pension Plan Investment Board (CPP Investments) formed a $695.8 million joint venture with Indian firm Tata Realty and Infrastructure to invest in commercial properties across India .
CPP Investments – Canada’s largest pension fund – which managed $437 billion in assets for 20 million members will invest $340 million in the joint venture, which will allocate up to $260 million for future acquisitions.
BARRIERS TO EMERGING MARKETS
While India offers fertile ground for foreign investment, Ontario Teachers’ Crane discussed some of the hurdles that institutional investors still face when trying to enter many emerging markets.
“Things we look at include the strength of the local legal system, the strength of local regulatory frameworks, the potential risk of corruption in these processes,” he said.
The Canadian fund also carefully reviews the quality of the companies it chooses to partner with in these markets. “We need to be sure that we are dealing with the best global standards of partners,” he said.
“Of course, more often than not, we also research the country’s receptivity to foreign capital and understand their capital restrictions.”
Teachers’ currently has $28.5 billion in infrastructure and natural resource assets globally, with a goal to increase allocation to these asset classes by $12.5 billion by five years.
In the Asia-Pacific region, the Canadian pension fund invested about $770 million and $1.9 billion in natural resources and infrastructure, respectively.
“We don’t have specific targets for particular regions. Transactions and capital will go where transactions are best from a risk and return perspective,” Crane said. “There was definitely a recognition, though, that we could do more in Asia, and it’s not just in infrastructure but across all business units,” he said.
“That doesn’t mean there’s more support for an Asian deal versus a non-Asian deal, but I would say there’s definitely a lot of support to allocate additional capital,” he said. .
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