OMERS’ Ralph Berg Shines a Spotlight on Infrastructure

Ralph Berg

At the Ontario Municipal Employees Retirement System, infrastructure plays a significant role in the fund’s portfolio: The asset class has risen to be the fund’s largest, making up 23% of all assets.

Ralph Berg, CIO of OMERS since 2023, has been at the forefront of the fund’s infrastructure ventures. He joined the plan in 2013 as executive vice president and global head of infrastructure, then became global head of capital markets in 2021.

Originally an energy banker, Berg spent more than 12 years at Deutsche Bank in London and was later named head of European utilities at Credit Suisse, a position he held for more than seven years before joining OMERS. 

“I ran infrastructure for close to eight years,” Berg says of his experience at the Toronto-based fund. “After that, I was asked to lead the capital markets, which is the other half of the balance sheet, for two years. So I had a pretty good and intimate understanding of how we were working, what was working, what wasn’t working and some of the challenges that we had, operationally, particularly in terms of our capital allocation model, or lack of one.” 

It seems operational efficiency could be Berg’s middle name. When he became CIO at OMERS, the fund made strategic changes to its operating model to boost efficiency; Berg said the fund had too many programs that operated very loosely.

“We didn’t have a capital allocation function, we didn’t have capital allocation processes, and our operating model didn’t allow for … cohesive, centralized decisionmaking,” he says.

For example, if Berg wanted to shift the C$138.2 billion ($96.12 billion) fund’s public equity allocation to 25% from 20% to take advantage of market conditions, he could not do it without flipping numerous switches that would interfere with the strategies of individual groups, basically making “people do things that they don’t necessarily want to do.”

Under Berg, the OMERS investment team has consolidated from 11 programs into six: three on the public asset side and three on the private side. To support these six teams, the fund created a total portfolio management group, which manages—and has built functionality to support—all of the fund’s different investment teams.

OMERS also created a new capital allocation team, which runs simulations every day to optimize what maximum returns the fund can achieve with the lowest possible risk, according to the actuarial requirements of the plan.

Additionally, the fund built a strategy team that meets weekly and includes Berg, the heads of all six asset teams and the heads of portfolio management and risk.

“That allows us, as the leadership group, to have really good visibility into what everybody else is doing and have a very transparent and effective process for allocating capital,” Berg says. 

Infrastructure and Real Assets

As the largest asset class in OMERS’ portfolio, with a 23% allocation, Berg says infrastructure has worked extremely well, as the characteristics of the asset class meet the needs and requirements of a mature defined benefit pension plan.

Berg touts OMERS as one of the early movers in infrastructure, first investing in the asset class in the late 1990s. OMERS, which now provides benefits to nearly 640,000 members, began investing in infrastructure because Ontario wanted to fund provincial social infrastructure projects, including schools, roads and bridges.

The solution: OMERS financed the construction projects with an ownership model that, according to Berg, was appealing “because it was an asset in Canadian dollars, with stable and very predictable returns, with long duration, with a high-quality counterpart that was very aligned to the health of the pension plan, and the performance of those returns with a good social ethos and a purpose that fits the requirements of the pension plan.”

After creating Borealis Infrastructure in 1999, initial investments were made in modest amounts of $5 million to $30 million per project, but the pension fund’s appetite for such opportunities grew. The fund made its first large infrastructure investment in 2002, during a time of economic liberalization in Europe and a significant increase in natural resource discoveries.

“With the creation of the European Union and the single market for energy, there was a wave of deregulation [and] liberalization of energy markets across Europe, which, together with the large gas discoveries in the North Sea, created a very efficient market for energy in the U.K., which resulted in much lower prices to the consumer,” Berg says.

This put pressure on some energy providers, like nuclear provider British Energy, which went bankrupt. OMERS, together with TransCanada Corp., formed a consortium to acquire a stake in British Energy’s Bruce Power nuclear generating station in Ontario, closing the deal in February 2003. (OMERS later acquired an additional stake to become the majority owner in 2014.)

“That is the moment where our investment sizes in infrastructure went from $10 million, $20 million to $1 billion-plus,” Berg says. 

Focusing on larger investments meant the fund had to go international. Scale became a much-preferred characteristic of the infrastructure portfolio due to its contributions to returns and the asset class’s ability to steer the portfolio.

“We are 100% direct drive in infrastructure: We don’t invest in external funds; we actually manage capital for third-party institutions that buy into our assets, and we have roughly C$7 billion of external capital that we manage behind 11 assets in our portfolio,” Berg says. “That allows us to secure better governance [and] larger stakes, but with greater portfolio efficiency in our allocation.”

The infrastructure portfolio is comprised of roughly 35 assets in more than 11 countries, primarily in North America, Western Europe, in addition to Australia and India. 

As much as infrastructure has thrived, real estate has been the worst-performing class for the last several years at many Canadian pension funds, including OMERS. In 2024, the asset class returned negative 4.9%, and in 2023, it returned negative 7.2%. But Berg, like many other investors, sees the asset class headed for a rebound. 

“I think things have been largely corrected,” Berg says. “I think the biggest share of the adjustment has already taken place, both in the market and on our own marks in our portfolio.” 

Real estate makes up approximately 13% of the diversified OMERS portfolio, which makes it one of the fund’s smallest asset classes, but still an important one.

“We are especially confident about diversification, not only across asset classes and globally, but also within real estate,” Berg says.

But Berg also says, looking ahead, that real estate and other asset classes could see their recovery postponed by global economic uncertainty.

“I think we are probably at the bottom, and the recovery could start, but I suspect the inflationary pressures that will result from lower growth expectations and the tariff announcements that we are reading about every day will probably delay that,” he predicts.

Tariff Wars and Investment Threats

Some Canadian politicians have said they are concerned with how little Canada’s public pension funds invest domestically, but Berg says OMERS, like many of its peers, outgrew the opportunity set in Canada many years ago.

“Canada is always around the 19% to 20% mark, and we’re very comfortable with that,” Berg says. 

Berg also says he is unconcerned about the investment implications of the ongoing trade war between the U.S. and Canada, even though 54% of the fund’s assets are U.S.-based. Because OMERS, like other pension funds, is such a long-term investor, it avoids decisions based on short-term issues.

“This is a period of some uncertainty, but fundamentally, [the uncertainty of the current situation] is [of] no long-term strategic consequence to our thinking,” Berg says, noting that OMERS needs to continue to diversify its holdings geographically. “We like Australia, we like Western Europe, we like India, so we will increasingly be more active in those markets.”

With a trade war and deteriorating relations between Canada and the U.S. based on the policies of U.S. President Donald Trump, Berg approaches U.S. tariffs more academically than emotionally.

“We can debate the politics around it, but economic theory has demonstrated a very long time ago that tariffs are inflationary,” Berg says. “[They] result in a displacement of better products and more competitive products out of the market, they make those products more expensive to the consumer, and that results in a transfer of value and low economic growth.” 

Nevertheless, OMERS is not counting out its U.S. investments. Some of its asset classes are more allocated to the U.S. than others due to the strength of U.S. capital markets. For example, Berg says it would be difficult to build a credit program with the size and complexity of OMERS’ without a very large allocation to the U.S. 

“U.S. public credit markets, private credit markets, high yield [and] leveraged finance are so much … larger and deeper and liquid and complex than any other credit market around the world,” Berg says. “Plus, the pricing and risk is more attractive to us.”

The majority of OMERS fixed-income exposure is in the U.S, and “we have no desire to make any changes to our allocation to the U.S. and no concerns or reasons that [we] would try that today,” Berg says. 

The Canadian Model

Canadian public pension funds are known for their operating model, the “Canadian model,” and associated with the Maple 8, the country’s largest public pensions. The model prioritizes direct investments and internally managed assets; good governance; and operations at many arms’ length from government. 

These funds have largely found success through this model, achieving funding surpluses and low fees. Asset allocators around the world look to Canada as inspiration for pension management.

“There’s no doubt in my mind that this is a very effective and has been a very successful model,” Berg says. “Understanding … the segments where we can develop expertise and generate alpha is a key priority. We cannot be the best at everything. We cannot be local or relevant everywhere around the world. We cannot understand and know every industry. So we need to carefully balance what we can do and why we do it with what that opportunity set is, in a dynamic way.”

Berg notes that the model is not always perfect: While a majority of Canadian public pension funds have chosen to operate by this model, a fund’s advantage at one point in a cycle might not be permanent, so OMERS is consistently trying to evolve its model so that in everything it does, the fund is competent and efficient. 

“There are things that we were really good at, and the best and the newest 10 years ago, that perhaps in asset classes that have matured fast, no longer give us those advantages today,” Berg says. “At the same time, there are new ones opening up, so I think the flexibility in that model and the very effective balance between membership interests, regulatory oversight and core internalized competences is what has driven this success.”

Lessons to Share

Crediting his team for OMERS’ strong track record, Berg emphasizes a calm, steady approach and open dialogue as keys to delivering returns for the fund’s members.

“We have built progressively and steadily a culture of transparency, collaboration and having very open and honest conversations about how each one of our programs are doing, what the opportunity set [is], where we’re really good, where we are not,” Berg says. “[Then we] allocate capital, not only on the basis of what looks attractive today, but what really works well for the balance sheet for the members of OMERS, for the risk-adjusted returns that the members of OMERS need, not taking risks that we don’t understand, that we cannot price, or that we cannot manage. If our operating model cannot be equipped with the capabilities of doing something, then we’d rather not do it.” 

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Tags: Infrastructure, OMERS, Ontario Municipal Employees’ Retirement System, Ralph Berg, Real Assets