Canadian pension giants split on investment strategies

As markets grapple with geopolitical shifts, AI disruptions, and evolving fiscal paradigms, Canada’s largest pension funds are quietly but deliberately recalibrating their investment strategies.

CPP Investments’ Manroop Jhooty and OMERS’ Brandon Weening recently laid out how their respective funds are navigating uncertainty and where they’re placing their bets for the long haul.

Jhooty, senior managing director and head of total fund management at CPP Investments, emphasized the fund’s unwavering long-term orientation but acknowledged the need to stay nimble.

“We are a long-term investor. Our objective is to maximize returns on behalf of the CPP over the long term to ensure planned sustainability. That's first and foremost our investing philosophy. What that means is that when we design the portfolio at the outset, we're trying to design a portfolio that can withstand multiple types of economic shocks and is able to be resilient through multiple cycles. It's not about setting up a portfolio that we think is going to be the best portfolio for the next 12 months. It's about setting up that portfolio that we think is going to maximize returns over the long run,” he said at the Bloomberg Canadian Finance Conference on Tuesday.

CPP doesn’t ignore near-term market conditions, but it interprets them through a broader lens. Instead of reacting tactically, Jhooty said the fund considers how current developments might influence long-term structural relationships, such as the balance between asset classes, currencies, or risk factors.

He underscored that short-term positioning tends to happen within individual investment teams, while the top-down approach focuses on shifts that could alter strategic allocations.

Several major trends are shaping CPP’s thinking today. Artificial intelligence tops the list, not just the obvious investment plays in tech giants, but the ripple effects on infrastructure, energy, and data.

“It’s not just thinking about the specific things around the Mag 7, but things that are adjacent to AI as well as those things that are explicitly AI,” he said, highlighting opportunities in power generation and data centers as CapEx flows ramp up.

Jhooty sees the AI boom as more than just a tech story as it’s unlocking a range of investment opportunities in the supporting infrastructure, pointing to constraints in energy supply and data capacity as areas where demand is surging and capital deployment could be especially attractive.

On public versus private markets, Jhooty outlined CPP’s nuanced approach to relative value. While CPP reduced its private equity exposure slightly - from 25 per cent to 21 per cent - he emphasized that this was not a strategic retreat, referencing challenges in PE exits and distributions.

He maintained that private markets still offer alpha and sees the adjustment as portfolio rebalancing rather than a judgment call on the asset class.

He also emphasized that CPP Investments isn’t steering clear of any specific markets right now, but the that fund is watching macroeconomic signals closely. Rather than making blanket calls to avoid specific assets, CPP is weighing whether positive momentum can outweigh the structural challenges ahead.

“It's really a balance between the tailwinds or the headwinds that are ultimately going to dominate the investing landscape,” he said.

As a frequent issuer in global debt markets, OMERS focuses on generating stable long-term returns while leveraging its top-tier credit rating, explained Weening, executive vice president of corporate and capital markets finance at OMERS.

As a AAA-rated issuer, OMERS taps global debt markets to lower its cost of capital and fund investments in sectors like infrastructure, real estate, and private credit.

“We’re borrowing at a triple-A rate, and we earn that spread through the lower cost of capital,” explained Weening, noting the fund targets a long-term return of about 7 per cent.

According to Weening, debt issuance for OMERS is driven by three main factors: where the fund sees deployment opportunities, the need to refinance, and the goal of maintaining natural hedges across currencies. Currently, OMERS focuses its issuance in US dollars, euros, and Australian dollars aligned with where it holds assets.

“We keep it in those currencies to deploy in those currencies and to achieve the natural hedge,” he said, adding that even in the absence of immediate investment needs, issuance can be used strategically to maintain currency alignment.

Weening explained that OMERS follows a consistent, predictable approach when it comes to issuing US dollar debt. This programmatic strategy is designed to build trust and maintain visibility in the US market. While the fund also issues in euros and Australian dollars, those offerings are expected to be less frequent. Still, all three currencies remain central to OMERS' funding strategy going forward.

Despite being a Canadian-based pension fund, Weening emphasized OMERS’ issuance strategy doesn’t include home bias. He explained that the fund already has significant Canadian dollar inflows from both member contributions and income from mature, cash-generating domestic assets.

Additionally, much of OMERS’ existing liquidity is already denominated in Canadian dollars.

“We don’t have a natural need for additional Canadian dollars,” he said, adding that it’s unlikely CAD will become one of the top three currencies the fund issues in, though he acknowledged that “things can change.”

Meanwhile, Jhooty emphasized the fund is increasingly optimistic about deploying more capital in Canada, pointing to a noticeable shift in policy momentum and political alignment behind large-scale infrastructure and nation-building projects, which is opening new investment avenues.

“We’re starting to see strong momentum and a galvanization of political will in a way that we hadn’t seen before,” he said.

While CPP already maintains a substantial Canadian portfolio, Jhooty underscored the fund is looking to grow it.

“We’re very bullish about investing in Canada and we’d love to be able to add to it,” he said.

Weening described the dynamic among Canada’s so-called Maple Eight as generally collaborative when it comes to term note issuance, but ultimately independent in execution.

 “We all have our own objectives, our own programs, our own parameters,” he noted.

While some funds take a leading role in entering new markets, others adopt a more reactive approach. “I’d characterize OMERS broadly as a fast follower,” Weening said, adding that OMERS often learns from the experiences of its peers before making its own moves.

He acknowledged that while the funds do share insights and “compare notes after any particular transaction,” there’s no coordinated effort or collective decision-making ahead of market entries.

“That is a lot more individual,” he said.