Navigating new realities in asset management

0

How does the original construct of Ontario Teachers’ influence the way you invest today?

Jonathan Hausman: Our model originated in 1990. The Government of Ontario, one of two sponsors of Ontario Teachers’ (the other is Ontario Teachers’ Federation), decided it was better for pension assets to be invested and managed by an organization that was independent from its sponsors. This meant we needed to delegate authority to experts and create a governance system that was going to remain de-politicized. This guided us on a path to do three things, which still hold true today.

First, innovation was, and is, essential. Initially, the fund only held government debentures that couldn’t be traded, so we had to use derivatives to diversify our portfolio. We were one of the first in the space to use derivatives extensively. Second, we brought our asset management responsibilities in-house. Our model as an independent and active, direct investor meant we needed to form execution teams in private equity, infrastructure, natural resources, venture capital and real estate, notably acquiring Cadillac Fairview in 2000, a holding we still have today. Lastly, global diversification was vital. To achieve this, we set up global offices, starting in London and Hong Kong, and now have more than eight offices worldwide.

How do you stay ahead of shifts in the macroenvironment?

JH: The environment in which we are investing is vastly different than it was even five years ago. We’re also in the midst of simultaneous paradigm shifts – geopolitical, climatological, technological and financial. When you’re faced with these shifts, the mindset that we bring to investing needs to be more critical of the underlying assumptions we have about the business we do and the environment we do it in.

We don’t know what the future will bring, so we have to prepare for more unknowns. We’ve had two “one-in-100-year” shocks in the last three years. You can be blown over by those or you can try to think through what an organization should do if X, Y or Z were to occur. We’ve gone through a process of figuring out what these instances could be and how these would impact Ontario Teachers’. We may not choose the right ones and they may never happen, but it’s the process of developing that musculature in the organization that builds the ability to anticipate and respond.

What do you see as the biggest challenge you’re facing in this new landscape?

JH: Every investment thesis is an evolving thesis and to me that’s the biggest challenge. It’s a balancing act between curling up into a ball and wanting it to go away, versus getting over the edge of your skis. To find that balance, you have to get convicted on a way forward and then be able to climb down if it doesn’t work. Management consultants call this “strategic imperfectionism” and it is how successful organizations will galvanize their teams in an uncertain environment.

link

Leave a Reply

Your email address will not be published. Required fields are marked *