The OPSEU Pension Trust is boosting its efforts to internalize the management of certain assets by launching an in-house trading floor on Wednesday.

The move to internalization provides the pension plan with many benefits, says Hugh O’Reilly, president and chief executive officer at OPTrust. “By being in the market in an active way, it gives us better perspective. . . . It allows us to more quickly execute our decisions.”

As well, managing assets in-house will help the pension plan scale back its management fees and transaction costs, he says.

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OPTrust has been working on managing its own public market assets, which represent about 40 to 50 per cent of the fund’s holdings, for about a year, says O’Reilly. He notes the process will be gradual with the plan initially assuming management of money markets, foreign exchange, bonds and repurchase agreements and then eventually taking helm of other public assets such as fixed income and derivatives until it ultimately takes responsibility for 16 types of securities.

In addition to cost savings, the change aligns with the plan’s mandate of member-driven investing, says O’Reilly. He notes that while low interest rates have pressured many pension plans to assume more risk, OPTrust is looking to ensure a calculated approach. “We want to make sure we’re paid for risk we take, that we understand the risk we take and that we invest in a way that we reduce volatility in the fund. . . . In order to do that most effectively, we need to internally manage certain investment activities . . ..”

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OPTrust is already managing real estate, private equity and infrastructure investments internally, and its ultimate goal is to do so for 70 to 80 per cent of its assets, says O’Reilly.

He notes building internal capacity to manage investments reflects the plan’s evolution. “This plan is 22 years old and in that 22 years, it’s gained expertise . . .. So [internalization] is another milestone along the way that demonstrates the increasing sophistication and maturity of the plan.”

Copyright © 2018 Transcontinental Media G.P. Originally published on

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