Good evening.
Thank you for inviting me here this evening. We believe the work of your committee is very important.
I'll be giving my presentation in English, my first language.
Thank you for inviting Ontario Teachers' to appear before this committee. I value the opportunity to be here today.
My name is Stephen McLennan. I am the executive managing director of total fund management. I have been with Ontario Teachers' for 20 years. My role at Ontario Teachers' is to oversee the total fund management department, which, among other things, coordinates the plan's asset allocation and top-down portfolio construction.
I would like to use my opening remarks, given the committee's focus, to introduce the Ontario Teachers' Pension Plan and describe how and where we invest.
The Ontario Teachers' Pension Plan was established in 1990 as an independent pension plan. We are a non-share capital corporation governed by the Teachers’ Pension Act in Ontario. The pension plan is jointly sponsored by the Government of Ontario and the executive of the Ontario Teachers' Federation. Together they ensure that the plan remains appropriately funded.
Our professional board members are appointed by our two sponsors. Our board oversees the management of Ontario Teachers'. Our board members are required to act independently of both the plan sponsors and management, and they must make decisions in the best interests of all plan beneficiaries. Day-to-day activities are delegated to the professional staff of Ontario Teachers', who are responsible for investing assets and administering plan benefits. As an Ontario-based pension plan, we are regulated by the Financial Services Regulatory Authority of Ontario.
As at December 31, 2022, we had $247.2 billion in net assets. We have been fully funded for 10 straight years and have a $17.5-billion funding surplus. Since inception, we have earned a net fund return of 9.5% per year.
We are a long-term investor with an investment horizon measured in decades. A key tenet of our investment approach is diversification. This includes diversification by asset classes, such as equity and debt, as well as by regions, sectors and time horizons. This allows us to create a balanced portfolio that is designed to be resilient across a number of different economic environments and circumstances.
As such, we have a global portfolio spanning multiple asset classes. At the end of 2022, we had investments in over 50 countries, with 85% of our investments in developed markets, such as North America and Europe. The remaining investments are in developing markets, primarily within the Asia-Pacific and Latin America regions. Here in Canada we invest in assets from coast to coast, in such companies as Atlantic Aqua Farms in P.E.I. and Global Container Terminals in British Columbia.
In addition to diversification, another key to our investment approach is a keen focus on risk management. Our board, with the support of the executive team, establishes our risk appetite, which in turn guides management actions, including those relating to overall risk parameters, as well as underwriting various types of risks, including geographic and country exposures. We actively monitor and assess geopolitical developments as a core input into the investment process.
As part of our underwriting process, we perform a variety of ESG-related risk and opportunity analyses to ensure that the businesses we invest in are built for long-term sustainability and success. This analysis is conducted by internal staff with support from time to time from investing partners and consultants.
Turning to Asia, we first established an on-the-ground presence in Asia through the opening of an office in Hong Kong, which gave us boots on the ground to manage investments in the region. Since then, we have established offices in both Singapore and Mumbai.
Today, while China is the world's second-largest economy and Canada's second-largest trading partner, it represents a relatively small proportion of assets, at 2.3% of the fund. In recent months, as we assessed the changing post-COVID economic environment, recent regulatory changes in China and the continued deterioration of U.S.-China and Canada-China relations, we reduced our investment activities in China and paused further private investments. We will continue to responsibly manage our existing investments in the country as well as in other countries in the region.
Thank you very much. I welcome any questions you may have.