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Canada's OTPP shuts down China equity investment business

By Reuters

  • 25 Apr 2023
Canada's OTPP shuts down China equity investment business
Credit: 123RF.com

Ontario Teachers' Pension Plan (OTPP), Canada's third largest pension fund, closed down its China equity investment team based in Hong Kong last week, several sources with knowledge of the matter told Reuters.

The Hong Kong's Securities and Futures Commission (SFC) website shows licences of five employees of the C$247 billion ($182 billion) pension fund were revoked on 18 April.

The staff were with OTPP's proprietary trading team in Hong Kong, covering Greater China stocks, two of the sources said.

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In a statement to Reuters, OTPP spokesperson Dan Madge confirmed the firm will "no longer have country-focused stock-picking teams based in Asia", resulting in the departure of five of their staff in its Hong Kong office.

"While this decision was not an easy one to make given the impact to our team, we feel it reflects the right model for our high conviction stock selection process going forward, with a centralised team based in Toronto pursuing investment opportunities in Asia as they do for other regions," Madge said.

The decision comes amid growing tensions between China and the West and a challenging equity investment environment due to the rising global interest rates. It also comes as more foreign investors trim their China exposure amid persistent geopolitical risks.

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Canadian authorities have recently started several investigations into the allegations of Chinese interference in Canada's 2019 and 2021 elections, accusations that Beijing denies.

In January, OTPP said it paused future direct investments in private assets in China but will continue to invest via fund partners. Its exposure to China was about 2%, or C$5 billion, of its portfolio. Geopolitical risk is among the risk factors that played a role in OTPP’s decision, a source told Reuters at the time.

Global SWF, a pension fund data platform, shows OTPP had completely exited the China’s domestic A-share market by end-2022, although it was never a significant investor.

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Nevertheless, Madge said Asia, including China, continues to be core to OTTP's global investment strategy.

OTPP's public equity portfolio lost 12.5% in 2022, although the fund returned 4% overall, according to its annual report. It opened new offices in Mumbai and San Francisco last year for investment diversification.

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