Ontario Municipal Employees Retirement System said there is a need for American institutions to make large real estate and infrastructure investments directly, and that Canada is “opening the door for partnership”.
OMERS vice president of corporate development, Philip Haggerty, told a panel at the Milken Institute Global Conference in Los Angeles Wednesday, that public pensions in the US would benefit from more direct investing, saying that Canadian pension systems had recorded annual returns of 5.3 percent over the past 10 years – compared to 3.2 percent for similar-sized US pension plans. And when coupled with the fact that fund investments generally cost pension plans between 4 percent to 5 percent, Haggerty said: “Do investments directly.”
However, Haggerty conceded OMERS began direct investing roughly 15 years ago, and therefore it would take just as long for American institutions to do the same. “It’s now possible for us to actively promote the direct investment model,” he said. “But it’s going to take a long time for a CalPERS or a CalSTRS or a Washington State to move in that direction.”
OMERS is forming three geographic-based alliances of large pension funds to invest directly in real estate and large infrastructure investments, Haggerty said.
In addition to the formation of a strategic alliance group with US institutional investors, the Canadian pension is also creating groups with European and Australian institutional investors, according to Haggerty. OMERS is creating these groups in order to export their in-house direct investment model, he said.
Haggerty warned that in order to start doing investments directly, there must be a “robust environment of opportunity,” and that institutions must separate the fiduciary interest from the self interest. “As I look at the American system, I see that that is what has not happened yet.”
Still, Haggerty expressed enthusiasm and optimism regarding the opportunity for American institutions to benefit from the Canadian direct investment model.
“In the context of infrastructure investment, we are opening the door for partnership,” he added.