Pension Giant: Let’s Form Global Infrastructure Investment Alliance

(March 10, 2011) – Building on local success, a Canadian pension is leading the charge for a global infrastructure investment alliance.

The Ontario Municipal Employees’ Retirement System (OMERS), the $53 billion fund based in Toronto, proposed the alliance at a pension conference in the United Kingdom yesterday, according to Financial News. Infrastructure – a common investment for large pension funds due to their steady cash returns – has been a staple of OMERS’ portfolio for years through its Borealis subsidiary, but is gaining momentum elsewhere as funds grow in size and are thus able to allocate more capital to these often illiquid investments.

According to Financial News, Jacques Demers, the CEO of OMERS Strategic Investments, stated that by end-of-year 2011, the fund plans to have a “strategic co-investment alliance” with other investors to go after mega-infrastructure deals – those over $1 billion in equity value. “We have been working on this for about 15 months and have had discussions with several of the organizations represented in this room already,” he told the conference.

OMERS already has such an alliance – at least informally – within the large Canadian pension sphere: In November 2010, Borealis and the Ontario Teachers’ Pension Plan joined forces to pay $3.4 billion for the rights to control the high-speed rail link between London and the Channel Tunnel.

The global infrastructure alliance is only the most recent of prominent moves by the Canadian fund. Last week, the fund announced that it wanted in on the management of a new pension product – the pooled registered pension plans proposed by the conservative Canadian government in late 2010. “Right now, it’s insurance companies and the banks,” Michael Nobrega, chief executive officer of OMERS, told reporters, according to CTV News. “I would suspect that the federal government would be wise to include a broader range of providers other than simply the banks and insurance companies, because the pension funds do have the muscle and investment systems to do it.”

Earlier this month, the fund also announced its 2010 returns. According to the fund, net assets grew to $53.3 billion last year, spurred by across-the-board positive returns. However, the pension fund’s funding deficit increased to $4.5 billion from $1.5 billion a year earlier.