Caisse, Ontario Teachers unveil G7 investor alliance

A pair of Canadian pension funds and Prime Minister Justin Trudeau’s government announced an institutional investors’ “leadership initiative” aimed at boosting global efforts on climate change, infrastructure and gender equality.

Michael Sabia, chief executive officer at the Caisse de Dépôt et Placement du Québec, and Ron Mock, chief executive officer at the Ontario Teachers’ Pension Plan Board, unveiled the initiative in Toronto on Wednesday along with Finance Minister Bill Morneau and Environment Minister Catherine McKenna. The group will enhance expertise in infrastructure finance and development in emerging economies, boost roles of women in finance and speed up implementation of climate-related risk disclosure, the Caisse said.

The world needs to invest $3.3 trillion (US$2.6 trillion) in infrastructure annually through 2030 to keep pace with growth, creating an “infrastructure gap” that is particularly critical in capital markets, the Caisse said in a statement. The groups will launch an infrastructure fellowship program, develop diversity policies and set up an advisory committee on climate disclosure.

“This is the start of something that we think is a bit different,” Sabia said in Toronto. The group will focus on collaboration to “take on some big issues,” he said. While the core role is to produce returns, he said “as long-term investors, we know that our returns are affected by the health and strength of countries where we invest.”

The Caisse and Ontario teachers will be joined by partner institutions including Alberta Investment Management Co., Germany’s Allianz SE, London-based Aviva and the California Public Employees’ Retirement System, according to the Caisse statement.

The investors will “promote gender diversity in capital markets, create an infrastructure fellowship program to help develop expertise in emerging and developing economies, and take steps to better recognize and report on the financial risks associated with climate change,” the government said in a statement.

Capital is not “properly aligned with the principles of sustainable development, and we need to change that,” McKenna said Wednesday. McKenna and Sabia lauded recommendations made by the Task Force on Climate-related Financial Disclosures, which was spearheaded by Bank of England Governor Mark Carney, and chaired by Michael Bloomberg, founder of Bloomberg LP.

Other members of the group include Banca Generali S.p.A., Natixis Investment Managers, the Ontario Municipal Employees Retirement System, the Ontario Public Service Employees Union Pension Plan Trust Fund and the Netherlands’ Stichting Pensioenfonds Zorg & Welzijn fund, known as PGGM, according to the Caisse statement.

Those institutions collectively manage more than $6 trillion, the Caisse said. The groups didn’t pledge any specific investment or new fund. Trudeau will host G7 leaders later this week in Quebec, with a dispute over U.S. metals tariffs set to dominate the agenda.

Ontario Teachers’ Pension Plan said to hire advisers to explore Exal sale

Ontario Teachers’ Pension Plan has hired advisers to explore a sale of Exal Corp., a manufacturer of specialty aluminum containers, according to people familiar with the matter.

Ontario Teachers’ is seeking about US$1 billion for Exal, the people said, asking not to be identified because the matter is private. No final decision has been made and Ontario Teachers may choose to keep the company, they said.

A representative for Ontario Teachers’ declined to comment. A representative for Youngstown, Ohio-based Exal didn’t immediately respond to requests for comment.

A group of investors led by the Toronto-based pension fund manager bought Exal Group in 2010 for an undisclosed sum. The company has manufactured aluminum containers for brands including Coca-Cola, Jack Daniels, Dove, L’Oreal, Pledge, Febreze, and Kraft. Founded in 1993, it now has operations in Argentina, Brazil and India as well as the U.S., according to its website.

Ontario Teachers’ said to test investors on taking U.S. mall owner Macerich private

Ontario Teachers’ Pension Plan Board has held talks with other investors about a potential deal to take U.S. mall owner Macerich Co. private, according to people familiar with the matter.

The Canadian pension fund, which owns about 16.5 per cent of real estate investment trust Macerich, has held discussions with firms including sovereign wealth funds about backing the potential bid, the people said, asking not to be identified as the details aren’t public. Talks are at an early stage and may not lead to a deal, the people said.

Macerich shares rose as much as 5.7 per cent, and traded up 3.7 per cent at US$68.45 at 9:45 a.m. in New York.

Representatives for Macerich and Ontario Teachers declined to comment.

The U.S. mall industry has been roiled as the rise of online shopping contributes to record store closures by traditional retailers, battering landlord shares and sparking speculation of takeovers. Australia’s Westfield Corp., which gets most of its revenue from the U.S., agreed last month to be acquired by Unibail-Rodamco SE, while Brookfield Property Partners LP is trying to buy the portion of GGP Inc. that it doesn’t already own.

Activist investor Dan Loeb’s Third Point fund disclosed a 1.3 per cent stake in Macerich in November. Loeb increased his holding since the filing period to almost 5 per cent, and was expected to agitate for changes at the company that could include a potential sale, people familiar with the matter said at the time.

Macerich shares closed up 3.5 per cent at US$66 on Monday, valuing the Santa Monica, California-based company at about US$9.3 billion.

The REIT currently owns about 54 million square feet of real estate, primarily interests in 48 regional shopping centres in New York, Chicago and Washington, as well as in Arizona and on the West Coast, according to its website.

Teachers’ and Vincor: been there done that and now back for more

Pass the parcel is a game played by little kids all across Canada.

And based on Monday’s news that U.S. based Constellation Brands has sold its Canadian wine business for $1.03 billion, a similar game is being played by investment management professionals.

Here, when the music stopped and the parcel was opened, the name inside was Ontario Teachers Pension Plan Board. But Teachers’ name was also inside the parcel when it started getting passed around about two decades back when the investing world first heard of Vincor International.

Back then Teachers was a shareholder in the privately owned Vincor. American Farm Investment Corp., a corporation controlled by Gerald Schwartz, was the largest shareholder with a 14.3 per cent stake while Teachers’ had a 12.5 per cent interest.

Vincor was set up in 1992 and acquired a number of wine producers including T.G. Bright and Co. Cartier and Inniskillin Vintners Inc. (Leland Verner, a well-known financier was chairman of Vincor and helped with a number of the acquisitions.)

In June 1996, Vincor went public via the sale of shares each priced at $8. The IPO turned out to be more difficult than anticipated: because of market conditions, the issue price for the shares was cut to $8 from the original aim of $10-$12 and the plans by some of the selling shareholders, including AFIC and Teachers,’ were iced. (In the end there was a small secondary sale by some insiders.) The other obstacle was the timing of sudden management shakeup just prior to the offering, which saw Heather Reisman, wife of Schwartz, replace Verner as chairman.

Vincor continued making acquisitions. By the time another equity offering rolled around in the fall of 1997, Vincor produced wines in New Brunswick, Quebec and British Columbia as well as in Ontario.

A July 1997 filing, showed Schwartz’s AFIC and Teachers plus other investors — which in total owned about 45 per cent of Vincor — were part of a voting agreement. At the time Dean Metcalf, a portfolio manager in merchant banking at Teachers was a director. How different were things? Back then liquor stores in Ontario weren’t open on a Sunday, though in the summer of that year, a trial opening for Sundays was underway.

In September 1997, when Vincor raised $24.7 million of equity, Teachers’ didn’t sell any shares. After that sale, Teachers owned a 10.6 per cent stake.

It’s not clear when Teachers’ stake fell below 10 per cent, the level where such holdings are detailed in the annual management information circular. The stake could have fallen because of a decision to sell or because of the effects of additional equity offerings.

What is known is that when the 2002 circular was published Teachers’ wasn’t indicated as a 10 per cent holder and that Metcalf wasn’t a director. We also know Vincor was busy raising $225 million of equity in its fiscal 2002.

Accordingly we don’t know exactly how and when Teachers’ relationship with Vincor ended. But for its 2003 annual meeting no shareholder had a 10 per cent stake.

The Vincor story as a Canadian public company ended in June 2006 when it was acquired by a subsidiary of U.S. based Constellation Brands in a transaction valued at $1.58 billion, of which shareholders received $1.227 billion.

The buyer paid $36.50 a share, which represents a healthy gain for those who put up $8 a share a decade earlier and kept it.

Financial Post

Ontario Teachers’ Pension Plan finds new chief investment officer in Denmark

The Ontario Teachers’ Pension Plan has appointed a new chief investment officer to replace longtime CIO Neil Petroff, who retired in June.

Bjarne Graven Larsen, who will also serve as executive vice-president, takes the role Feb. 1, and will report to chief executive Ron Mock.

Graven Larsen is a former CIO and executive board member of Denmark’s largest pension plan, ATP, which is the fourth largest pension in Europe.

Most recently, however, he was chief financial officer of Novo A/S in Copenhagen, and before that he led the successful turnaround of Denmark’s sixth largest bank, FIH Erhvervsbank A/S, which was acquired by an ATP-led Danish consortium.

“With his investment expertise, global experience, forward thinking on risk management, and importantly, hands-on work within a total return framework, Bjarne is uniquely positioned to be our Chief Investment Officer,” Mock said in a statement Monday.

“He has the experience and vision to lead our world-class investment team into our next generation of global growth.”

Graven Larsen will lead Teachers’ senior investment leadership team, which was recently restructured “to reflect the evolving global pension investment environment,” the pension plan said.

Divisions include infrastructure and natural resources, public equities, capital markets, portfolio construction, emerging markets, Asia-Pacific, real estate and investment operations.

Graven Larsen, who is also former managing director of Denmark’s largest mortgage bank and a former monetary policy director at Denmark’s central bank, said he has “admired the innovative work and success of Ontario Teachers’ for many years.”


There was good news amidst the market turmoil, and some of it was coloured green

On a day when bad news dominated -– Beijing issued its first red alert over smog levels, the Canadian dollar hit an 11-year low, and the S&P/TSX Composite Index fell by 2.37 per cent – the challenge was to find something positive. We may have been successful.

Consider these recent developments:

Bank of America Merrill Lynch. The investment firm’s research unit released a 109-page report on green bonds, part of its transforming world series. There are considerable opportunities, it argues against a background of climate change: 2015 will be the hottest year since records began in 1880; extreme weather is now recognized as the No. 2 risk worldwide and affects 10 per cent of the globe (versus 0.1- 0.2 per cent over the period 1951-1980.)

Without action, the report argues the cost of climate change could rise to between 1 and 5 per cent of GDP per annum “while global investment portfolios could lose up to 45 per cent of their value to 2020. However, world leaders, corporations, and investors are uniting to support positive change in the clean energy transition and energy efficiency,” it writes.

But the dollars needed to get there are huge: Over the next 15 years, annual investment of US$6.2 trillion is required in low-carbon infrastructure, “to achieve global growth expectations,” [with] 60 per cent of that investment occurring in emerging markets.” China (which needs an annual US$450 billion) and India (US$165 billion a year) have the greatest need of which “up to 85 per cent of that must come from private capital.”

The report notes Green Bonds, or fixed income instruments where proceeds are earmarked for environmental solutions, “are key” to mobilizing private capital for environmental needs. They provide “derisking, scale and liquidity for climate finance in both developed and emerging economies,” it writes arguing that by 2020, green bonds and other innovations could enable around US$120 billion of incremental annual investment.

The good news: issuance keeps rising (for the fourth year in a row with 45 per cent of the issuance in 2015 coming from corporates) and this year the market has expanded to US$100 billion.

The universe is home to more than 600 bonds issued by 24 countries, in 23 currencies, with both high yield and investment grade options.

Goldman Sachs. A few weeks back, the firm regarded as being home to the brightest and best announced it was quadrupling its global commitment to finance clean energy infrastructure over the next decade. From now on, it plans to invest US$150 billion in a variety of clean energy projects and technology (a catchall that covers solar and wind farms, energy efficiency upgrades for buildings, and power grid infrastructure.) The firm has taken a long-term view. According to a report Goldman Sachs regards the transition to new energy technologies as still in the “early innings of an economy wide transition.”

Ontario Teachers Pension Plan Board. The fund that also hires some of this country’s best and brightest, has also upped its investment in renewables over the past three years. According to a report, the fund has invested $3.5 billion in wind, solar and hydropower assets – up from close to zero three years back. To give some focus to the effort it has hired a vice-president of renewables. Over time the fund’s expansion into renewables will come, as investments in oil and gas will become a smaller part of its $155 billion portfolio.

Cenovus Energy Inc sells oil and gas royalty business to Ontario Teachers’ Pension Plan for $3.3 billion

TORONTO — The Ontario Teachers’ Pension Plan says it has an agreement with Cenovus Energy Inc. to acquire Cenovus’s wholly-owned subsidiary, Heritage Royalty Limited Partnership, in a deal worth about $3.3 billion.

Calgary-based Heritage Royalty holds a broad portfolio of oil and gas royalties in Western Canada. It holds about 4.8 million acres of royalty and mineral fee title lands in Alberta, Saskatchewan and Manitoba, Cenovus said Tuesday in a statement. These generate revenue from drilling by other companies.

“The proceeds from this sale will strengthen our balance sheet and provide us with greater resilience during these uncertain times as well as the flexibility to invest in organic projects with strong returns,” Cenovus Chief Executive Officer Brian Ferguson said in the statement.

The pension plan says the deal, led by Teachers’ Natural Resources Group, is expected to close by the end of July once it receives the customary regulatory approvals.

The decision to monetize the properties comes after the dramatic drop in oil prices since last year. The Calgary-based company raised $1.5 billion in a share sale in February as it sought to weather the slump. Since then it has considered several options to boost value from the royalty business, including a potential initial public offering of the unit.

The sale to Ontario Teachers’ is set to improve Cenovus’s ratio of net debt to capitalization, which was 27 per cent at the end of the first quarter, according to the statement.

Heritage Royalty had revenues of approximately $320 million in 2014 based on average production of approximately 14,800 barrels of oil equivalent per day.

The Calgary-based company owns one of the largest packages of fee title acreage in Canada — about 4.8 million acres in Alberta, Saskatchewan and Manitoba.

The acreage is bigger than analysts had been expecting and it includes added royalties, including from the Pelican Lake project. Michael Dunn of FirstEnergy Capital Corp. estimated earlier this month that a value of as much as C$3 billion wouldn’t be unreasonable.

Teachers’ created Natural Resources Group in 2013 to manage assets that include timberland, agriculture and oil and gas. With $154.5 billion in net assets as of Dec. 31, 2014, the Ontario Teachers’ Pension Plan is the largest single-profession pension plan in Canada.

Cenovus Energy had confirmed on June 19 that it was in talks about the potential sale of royalty lands but provided no details.

With files from Bloomberg

Jeff Davis named general counsel at Ontario Teachers’ Pension Plan

Jeff Davis, an executive who was “instrumental” in establishing offices of the Ontario Teachers’ Pension Plan in Hong Kong last year, has been named the pension manager’s general counsel, corporate secretary and senior vice-president of corporate affairs.

He joined Teachers’ in 2004 and was promoted to associate general counsel in 2010. Mr. Davis has been acting in the role of general counsel since June.

In his new role, he will be responsible for the legal team, as well as compliance, corporate communications, government and public affairs, and plan policy.

“Jeff is highly regarded for his skills and knowledge, and especially for his natural sense of partnership”,  Ron Mock, Teachers’ president and chief executive, said in a statement. “He has worked closely with regulatory authorities in Canada, the U.S. and internationally and has led the legal team in countless transactions globally.”

Mr. Mock said Mr. Davis was instrumental in establishing Teachers’ Hong Kong office, obtaining securities licenses and registrations in China and Hong Kong.

“His securities knowledge is second to none,” Mr. Mock said.

Mr. Davis said he is excited to be taking on the role, given “the global nature of transactions, increased regulatory measures and, of course, the demographic reality” of an aging population.

Prior to joining Teachers, Mr. Davis was senior vice-president of corporate and legal affairs at InsLogic Corp., and a corporate associate at Torys LLP.