The Ontario Teachers’ Pension Plan’s Asian public equity portfolios will be managed by a high conviction equities group based in Toronto.
“In considering the optimal model to invest at scale in global public equity markets, we recently made the decision to concentrate the active stock picking activities in our high conviction equities group under our team in Toronto,” said the pension fund in the statement.
As part of the change, the Ontario Teachers’ is shuttering its Hong Kong-based equity selection team, though the office itself will remain in operation. “With this change, we will no longer have country-focused stock-picking teams based in Asia, resulting in the departure of five of our colleagues in our Hong Kong office.”
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Sam Goodman, senior policy advisor at Hong Kong Watch, an organization that tracks public sector pension investments in the Chinese economy, calls the Ontario Teachers’ move commendable, given the ongoing crackdown in Hong Kong. “It’s . . . a far more secure strategy for Canadian pension funds to make investment decisions here in Canada that protect against investments in companies linked to human rights abuses.”
Hong Kong Watch frequently highlights how China’s public companies present environmental, social and governance-related challenges to Canadian pension plans on a number of fronts, particularly human rights. In its past reports, the watchdog has found these companies are bound by domestic security laws requiring them to support the Chinese government’s suppression of human rights.
Read: BCI, CPPIB and OTPP investments tied to human rights abuses in China, finds watchdog
Goodman urges the Ontario Teachers’ to take the opportunity to review whether any investments in Chinese equities and government bonds is aligned with its ESG criteria. “After all, sustainability, good governance and a commitment to human rights is something that all of the OTPP’s members expect it to integrate into every investment decision [it] makes,” says Goodman.
“You’d be hard pressed . . . to find a company in China that offers high returns and meets the rigorous ESG standards that many Canadian and American organizations purport to care about for their members and clients,” he adds.
However, the pension fund said the decision was made because it felt managing public equities through a centralized team based in Toronto is a preferred model and shouldn’t be seen as a move away from Chinese equities. “Asia continues to be core to our global investment strategy, including China, where our focus is on building value in our existing portfolio, investing in private and public assets via fund partners and in [selecting] public companies via our global investment teams,” said the statement.
The announcement comes a few months after the Ontario Teachers’ confirmed reports it wasn’t making further direct investments in Chinese private equities. In January, it said it would remain exposed to the nation’s private markets through allocations to investment funds.
Read: Sounding board: Institutional investors making Canada’s approach to China unsustainable