An uneasy economic landscape between Canada and the U.S. is pushing the University Pension Plan to perform more stress testing for new and existing investments south of the border, says chief investment officer Aaron Bennett.
“It also makes us think a lot more about global inflation and how should we be thinking about [it] in the portfolio. What are some of the things that we can do to make sure that the portfolio remains resilient through a variety of different inflationary or deflationary outcomes?”
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The investment organization’s stress tests for its U.S. investments include examining a wide range of tax regimes or trade regimes. The ongoing trade dispute between Canada and the U.S., alongside a discussion of the domestic allocations by pension funds, is pushing some to question whether institutional investors should reconsider their entire strategy involving the U.S.
Bennett says increased risk in one territory can open the door to opportunity in different spaces like the European Union and even Canada, which he says is starting to think about “nation building projects,” the impact from these on the investment environment in the country and how it can create more globally competitive opportunities to invest at home.
The geopolitical landscape is increasingly complicated and now it’s pushing pension funds to answer questions on allocations around the world. The UPP is facing a unique case with an official motion from the University of Toronto Faculty Association requesting the investment organization to divest “from the manufacture of weapons used to commit or facilitate war crimes, crimes against humanity, and other serious violations of international law in the Occupied Palestinian Territory and elsewhere.”
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In a emailed statement to Benefits Canada, the UPP said it’s in direct contact with the UTFA on its request. Any divestment considerations, it added, must comply with the Pension Benefits Act and other applicable law, that centres the fund’s long-term financial security.
“We value open dialogue with our members and remain committed to ongoing engagement as the situation evolves. We will continue to monitor these developments closely and assess them through the lens of our responsible investing policies.”
Bennet says the entire investment team and the organization is aligned with the integration of responsible investing as part of its overall fiduciary duty.
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