Canadian pension fund manager OMERS would like to invest more in building new infrastructure, its chief financial officer said, making it a candidate to support government programmes in Canada and the United States.
Canada has set up an ‘infrastructure bank’ to supplement government investment in projects like new roads and bridges with funding from private investors such as pension and sovereign wealth funds. At the same time, President Donald Trump is planning a US$1 trillion investment programme.
Canada’s biggest pension funds are among the world’s biggest infrastructure investors but they have traditionally preferred to invest in ‘brownfield’ assets that have already been built rather than ‘greenfield’ projects yet to be constructed.
However, with competition for ‘brownfield’ assets inflating prices around the world, some funds are becoming more open to ‘greenfield’ spending to generate the kind of returns they are looking for and veteran pension executive Jim Leech, who is advising Canada’s government on infrastructure, has said the greatest need is for ‘greenfield’ investment.
“Greenfield investments are part of our strategy,” said OMERS CFO Jonathan Simmons said on Friday after the fund reported its 2016 results. “We’ve done a very small amount up until this stage but we do have some appetite if the opportunity is right around ‘greenfield’ investing.”
Simmons said the fund would be willing to invest in assets if they are of sufficient scale, if it has a say in the management of projects and if measures are taken to limit the risk the fund takes on.
“When those three elements align then we’re able to bid seriously on infrastructure. Without those three elements, we have less appetite,” Simmons said.
OMERS, or the Ontario Municipal Employees Retirement System, said it generated a 10.3 percent return in 2016, ahead of the 6.7 percent return it achieved in 2015 and ahead of a benchmark target of 7.9 percent.
OMERS said its net assets rose to more than C$85.2 billion, up from C$77.1 billion in 2015.
Canada’s sixth-largest public pension fund said it achieved a 9.5 percent return from investments in publicly traded shares and bonds. Investments in private equity, real estate and infrastructure produced returns of 12 percent.
Canada’s biggest public pension plans have grown rapidly in recent years through a strategy of directly investing in private equity, infrastructure and real estate assets to diversify away from public equity and fixed income markets.