Q&A with HOOPP

Jim Keohane, president of the Healthcare Ontario Pension Plan (HOOPP), is credited with reducing the organization’s investment risks, which helped the plan weather the financial downturn and come out well ahead of the market by 2009. In this Q&A, Keohane discusses his investment strategy and its application to HOOPP.

Who is your investment strategy influence?
Jack Meyer, who ran the Harvard Endowment Fund from 1990 to 2005. During that time, he grew the fund from $4.8 billion to a value of $25.9 billion. He had an incredible track record of beating the markets in the ’90s. One of his ideas was acknowledging that it’s difficult to call directional changes in the market. Instead, he focused on identifying and buying undervalued assets.

How has that influenced decisions at HOOPP?
Looking for relative value is part of what we follow as well. We want to make sure we’re buying a good deal. Then we try to sell our overvalued assets and continue to buy undervalued assets. Generally speaking, in the end, the biggest impact on your return is if you didn’t pay too much for it in the first place. For example, the NASDAQ has gone way farther than what people expected, but those who invested haven’t made money because they overpaid.

What lessons have you learned from the market bursts and downturns you’ve navigated while at HOOPP?
From the tech meltdown we learned that valuations of companies do matter. From the most recent 2008 downturn, we learned that liquidity matters. Some pension plans that had liquidity were able to take advantage of the bottom of the market. We managed our liquidity well, and there were tremendous opportunities.

How will your equity strategy help to attain the plan’s return goals?
With equity risk being high right now, equity valuations compared to bonds are very low. We’re being compensated with high-risk premiums to own equities and credit.