Ontario Teachers’ Mock: ‘All Assets Are Expensive’

The head of one of the world’s largest investors has told world leaders in Davos that finding a good deal in current markets has become increasingly tricky.

Speaking at the World Economic Forum in the Swiss ski resort, Ontario Teachers’ Pension Plan (OTPP) CEO Ron Mock said that across asset classes “everything is expensive,” according to a report from the Wall Street Journal.

“Infrastructure yields have come down to the single digits, which ignore the regulatory risk.” – Ron Mock, CEO, OTPP“In the infrastructure space, there is so much money chasing these alternative assets, it’s turned into non-stop auctions,” said Mock. “Infrastructure yields have come down to the single digits, which ignore the regulatory risk.”

His comments echoed a study by Preqin last year showing infrastructure deals were 12% more expensive in 2014 than the previous record set in 2012.

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“On the private equity side, there are deals at huge multiples of Earnings Before Interest, Taxes, Depreciation and Amortization [EBITDA],” said Mock, “and the spread between public and private yields are very narrow.”

However, Mock, who leads the C$140.8 billion (US$112.9 billion) plan, said in another Davos interview with CNBC that both asset classes were important to its portfolio.

He said private equity partners were key to its global investments: “We allocate to firms all over the planet. Where we don’t have people on the ground, having partners is really important to us.”

In both interviews, Mock asserted OTPP’s commitment to hedge funds, despite several of the plan’s peers opting to dump the asset class.

“We still have a good, sizeable allocation to them,” he told CNBC. “2014’s results were strong—above the industry average. It’s about who you select and choose to give money to.”

Regarding the Bank of Canada’s recent interest rate cut, Mock said the move was understandable given the oil price dip and issues within the country’s real estate market.

The UK government has become the latest developed nation to seek international funding for its domestic infrastructure projects.

Major international institutional investors have been invited to an event at London’s Downing Street hosted by the UK’s Regeneration Investment Organisation to showcase opportunities in three major cities: Birmingham, Bristol, and Leeds.

The move follows similar action by President Obama in July to tackle a lack of infrastructure in the US; a $1 trillion project launched by the World Bank in October; and Canada’s Caisse dépôt et placement du Québec signing up to a C$4 billion ($3.4 billion) set of local public projects, announced this month.

Insurer Legal & General (L&G) has thrown its support behind the UK venture, launching and committing £1.5 billion to a regeneration vehicle. A target of £15 billion has been set to be gathered from other investors and will support general regeneration work alongside housing and infrastructure spending.

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A spokesman for L&G told CIO that the Regeneration Investment Organisation had invited around 30 sovereign wealth funds and large international investors to the event. L&G’s model is already being used for specific projects in other UK cities, meaning investors work with a local partner.

This latest project will look to invest further than the three cities highlighted at the event.

A note from Fitch ratings today showed the net gap in European infrastructure spend to have reached €36 billion in 2015, according to figures from DTZ. A lack of spending and financing from the banking sector has left the shortfall, which has not yet been filled by new investor cash.

Infra net gap