HOOPP is the pension plan for Ontario healthcare workers and has one of the highest funding ratios and performance, in terms of alpha, over the past ten years. This is largely in part to its unique portfolio approach and focus on liquidity management, which has allowed the fund to outperform its peers. We had the pleasure of speaking with HOOPP CEO, Mr. Jeff Wendling, about the fund’s past successes, current strategy, and future objectives.
[GSWF] What makes HOOPP unique and what role does it play in Ontario?
[HOOPP] We are one of the strongest and fastest growing plans in Ontario. We pay out CA$ 3 billion to our retired members every year, and we think of ourselves as a pension delivery organization that works to meet our pension promise over the long term. We are focused on growing our assets at a higher pace than our liabilities, in order to minimize the risk to our surplus. We therefore can have a higher weight of fixed income assets in our portfolio.
[GSWF] HOOPP has grown its AuM to CA$ 113 bn and members to just under 0.5 million. How much more will it grow?
[HOOPP] We now have 670 employers and that has grown dramatically over the past few years. We serve a broad system of healthcare employers, including long-term care homes, hospices, mental health facilities, research facilities, and other employers in the healthcare space. Given changing demographics and an aging population, we expect higher levels of membership growth in the coming years.
[GSWF] HOOPP follows a Liability-Driven Investing (LDI) approach –can you please explain how this works?
[HOOPP] The Liability-Hedge Portfolio (LHP) invests in assets that behave in a similar way to our liabilities, including real return bonds, real estate, and infrastructure assets, which limits the volatility of our surplus when markets go up or down. The the Return Seeking Portfolio (RSP) ensures that we earn a premium on top of that, with equity-type assets which includes listed equities and private equity.
[GSWF] HOOPP has generated an alpha of 2.3% p.a. in the past 10 years and has a 115% funded status – what is your secret?
[HOOPP] HOOPP invests for the long term and, historically we have exceeded our benchmarks, providing value to the Fund. Our active investing approach and our team of strong investors are key to our success. We have also benefitted from declining interest rates since the early 2000s. We are very prudent managers of liquidity, which was useful during the global financial crisis and through the pandemic, as it gave us the opportunity to buy undervalued equities and generate higher returns.
[GSWF] Canada represents 55% in your portfolio (largest among Canadian Peers). Do you see this changing in the future?
[HOOPP] HOOPP invests in the Canadian market in areas such as bonds, real estate, and infrastructure. 50% of our real estate portfolio sits in Canada. We focus on rule of law countries, including Canada, the US and Western Europe. At the same time, we do need geographical diversity and we continue to look at investments globally, including in Asia. With any portfolio, diversification is key for managing risk. With a portfolio of more than CA$ 100 bn, the HOOPP investment team conducts risk assessments and analyses on a large and global scale. All else being equal, we prefer to invest in Canada when the risk and reward are appropriate.
[GSWF] What is your ESG approach? Do you maintain an exclusion list or prefer engagement with portfolio companies?
[HOOPP] We recognize that climate change poses both material risks and opportunities, and managing these are important. We consider climate risk as part of our investment management process. Our ambition is to be net-zero by 2050 and we are using interim targets. We have a goal of having CA$ 23 bn in green assets by 2030. The Plan also conducts engagements both directly with companies and through involvement with external initiatives, such as Climate Engagement Canada (CEC), of which HOOPP is a founding member.
[GSWF] Your team has grown 26% in the past three years, to 940 employees. Why such an important growth?
[HOOPP] HOOPP has the lowest cost among Canadian funds, and we like to be agile and lean. However, we need to continue to build our internal capabilities, including front and back office, as the fund grows. We have built a strong risk division with a new CRO in 2020, and we continue to build out our IT division to support in navigating upcoming changes in the industry. We have grown most of our investment teams, including real estate and infrastructure, as we look to strengthen our organizational leadership through the addition of new talent and promotion from within.
[GSWF] You have been at HOOPP for 25+ years - how has the organization changed since 1998, and what are your main goals for the next 3-5 years?
[HOOPP] We were much smaller in terms of assets and people. We are now a more diversified organization, well positioned for the future. We need to maintain a resilient portfolio that can help us get through challenging periods in the industry that may arise. Another key focus is on the people side, ensuring that we are attracting and retaining top talent. We also continue to work on developing and growing our technology division, as they work to protect us against potential cyber threats and work to identify risks and opportunities in AI.
