Texas Teachers, CPPIB Among Nominees for Inaugural Overseas Award

Some of the most influential asset owners worldwide are shortlisted for a new satellite office category at CIO Europe's Industry Innovation Awards on June 2 in London.

Pension funds from Sweden, Denmark, Switzerland, the Netherlands, and the UK are among the nominees for this year’s CIO European Innovation Awards.

Oh, and Canada, the US, Korea, and Kuwait.

As 18^th century writer Samuel Johnson once famously said, “Sir, when a man is tired of London, he is tired of life; for there is in London all that life can afford.”

While residents of New York, San Francisco, Paris, Berlin, and countless others may dispute this, an elite group of asset owners have embraced the UK capital as a vital part of their strategy. As such, for the first time, this year CIO will be shining a light on those investors who have set up a home away from home in one of the continent’s major cities.

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Accompanying the likes of AP4, PensionDanmark, the Universities Superannuation Scheme, and APG along the proverbial red carpet on June 2 at the Rosewood Hotel will be the Teacher Retirement System of Texas (TRS), Canada Pension Plan Investment Board (CPPIB), Korea’s National Pension Service, and the Ontario Municipal Employees Retirement System (OMERS).

They are among eight non-European asset owners nominated for the inaugural Overseas Office award. This prize has been designed to recognize those investors who have dedicated time, money, and resource to a physical, long-term presence in Europe, adding value to their portfolios and benefitting their members in the process.

“Oftentimes a key driver of success can come from having boots on the ground, local knowledge, and better access to deal flow,” says Amir Saleem of consultant bfinance’s sovereign advisory group. “An office in London can make good sense, not only in terms of opportunities available here in the UK with its mature and well-developed market, but it can serve as a hub to cover the wider European region.”

TRS was the first US pension to set up shop in the UK capital when it placed Vaughn Brock, former director of special projects, in charge of the new office in September last year. The pension believes it can triple its exposure to potential property deals with a presence ‘on the ground’ in one of Europe’s most attractive real estate markets.

One of TRS’ peers to the north, OMERS, established a London office for its private equity subsidiary in 2009. Led by Senior Managing Director Mark Redman, the team has been involved in transactions worth more than $5 billion. These included two in collaboration with the Alberta Investment Management Company (AIMCo). In 2013 the pair bought cinema chain Vue for £935 million, and last year—following the opening of AIMCo’s London office in 2014—they bought Environmental Resources Management for $1.7 billion.

Why come to London? The answer is usually simple: It’s the finance capital of Europe, after all. Announcing CPPIB’s office opening in 2008, then-CEO David Denison said it would allow earlier identification of investment opportunities, and make it easier to monitor its significant existing investments in the UK and Europe. “As a global investor, opening an office in London is a logical step as we expand our presence internationally,” he added.

The importance of a local office was highlighted just last month when AIMCo, Ontario Teachers Pension Plan, and the Kuwait Investment Authority collaborated to buy City Airport, the most central of London’s air transport hubs. All three have offices in the UK capital.

The full shortlist, along with the shortlists for nine asset owner and 13 asset management and servicing awards, are now available on the Innovation Awards microsite.

The National Employment Savings Trust (NEST)—the UK’s nationwide defined contribution vehicle—has appointed Amundi to run an emerging-market debt mandate within a number of its target-date funds.

“We want a fund in our toolbox that will allow us to take advantage of the opportunities as they emerge.”CIO Mark Fawcett said the new asset class would improve diversification with NEST’s return-driven portfolio, as well as give access to an attractively priced asset.

In the active strategy, Amundi will have flexibility to invest across hard- and local-currency debt, sovereign bonds, corporate bonds, and foreign exchange markets.

“We wanted a fund manager that could take advantage of the opportunities as and when they arise,” Fawcett said. “I don’t see it as our job at our size to make those calls,” he added.

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While NEST has predominantly backed passive or smart beta mandates in equities, within fixed income he said active management was “very important.”

Emerging market debt will play an important role within NEST’s ‘foundation phase’ funds, according to Fawcett, as a lower-volatility alternative to emerging market equity. The CIO said he would initially build the allocation up towards 5%, dependent on the performance of other asset classes.

“Our members are investing for the long term and we make decisions on how to diversify their portfolios against a backdrop of long-term market developments and valuation outlooks,” the CIO added. “We think emerging-market debt is becoming undervalued. We want a fund in our toolbox that will allow us to take advantage of the opportunities as they emerge.”