The Investment Process: Impact and Focus of Decisions

In the endowment industry, investors closely watch and hope to emulate funds like Yale and Harvard. For the pension industry, the Canadian Ontario Teachers Pension Plan (OTPP) surely fits into the same league. With a clear view of what the plan’s main success drivers were, the fund transformed itself into a leading pension fund worldwide. Leading the way to shape future investment processes is not without risk however, as Canadian OTPP experienced when the fund with three private equity partners proposed to buy Bell Canada Enterprises for the staggering amount of $52 billion. The sheer size, as well as the hands-on approach in buying companies directly, and the (economic) risks attached, created a lot of public attention. The difficult deal for OTPP points to one of the drawbacks of being possibly the world’s most actively managed pension fund; it certainly would not have faced such public scrutiny if it had invested in index funds.¹ But then again, the fund probably would not have earned such impressive returns above its benchmark. Between 1990 and the end of 2008 it managed to outperform its annual benchmark by 2.1% on average.