'Home-country bias': HOOPP bets on Canada amid market turbulence
The Healthcare of Ontario Pension Plan (HOOPP) is placing its bets on Canada, despite a down year in 2018.
“We have a home-country bias to Canada,” HOOPP president and CEO Jim Keohane told BNN Bloomberg in an interview Monday. “We have 10 per cent weight in Canadian equities; I think the global capitalization of Canada is about three per cent, so we’re essentially overweight Canada.”
HOOPP announced its 2018 returns on Monday, gaining 2.17 per cent on its investments compared to 10.88 per cent in 2017.
Keohane said the pension plan was able to gain during last year’s market rout by being “defensively positioned” towards “challenges on the horizon.” He said the company’s Canada-heavy approach stems from familiarity.
“Because we’re Canadians we know more about Canada than other countries, and also when you move into other countries, you take on currency risk, which we don’t have in our own domestic market.”
Keohane’s approach counters that of the Canada Pension Plan Investment Board, whose CEO told BNN Bloomberg last month that currency gains from foreign investments helped offset market turbulence in its returns.
“Geographical diversification helps,” CPPIB CEO Mark Machin said in a Feb. 14 interview. “When we had losses on the direct investment portfolio they were offset by that currency gain from being diversified into different markets.”
Machin said at the time that CPPIB was eyeing increased investment in China, despite ongoing trade turbulence with the United States.
“For a fundamental, long-term investor who is prepared to do the work, it can offer very significant opportunities for outperformance,” Machin said.
Keohane said that HOOPP, too, was eyeing an increased presence in Asia, stating that the pension plan can’t continue to grow on Canada alone.
“We are looking at expanding a bit more into Asia than we have been in the past and looking at other markets, as well,” he said.
“We are trying to move farther ashore, again, because as we get bigger we’ll need to expand our universe. It’s pretty hard to do that within the Canadian context.”