As interest rates rise across the developed world, assets such as private equity and infrastructure are expected to outperform other asset classes, Wendling said.
Private equity was HOOPP’s best performing asset class in 2021 and Wendling expects the allocation to increase in the coming years. Approximately 50% of the fund’s private equity assets are in the United States; with about 25% in Europe and about 15% in Canada, Wendling noted. The remaining assets are distributed elsewhere in the world. HOOPP typically invests in private equity through funds, direct investments and co-investments, as well as other opportunities such as structured equity and private debt, he added. The current private equity allocation is around 10%, but the fund has “no fixed target” for increasing the allocation in coming years, Wendling added.
HOOPP began investing in infrastructure in 2019 and although it only represents about 2% of total assets, its allocation is expected to continue to increase over the next few years, he said.
The pension fund invests in both private infrastructure assets as well as private infrastructure funds across a broad swath of the asset class, he added, including renewable power generation. in the USA ; fiber optic communications and data infrastructure in Europe; and broadband communications and data companies in the United States
Mr. Wendling said these transactions are usually direct deals or co-investments with strategic partners. A spokesperson declined to identify strategic partners.
HOOPP also finds real estate attractive, Wendling said, noting that the asset class has a 20% allocation of the entire fund.
As real estate recovered from the negative effects of the pandemic, HOOPP more than doubled its deal activity in 2021 compared to 2020, with about $4.4 billion in new investments and commitments, according to its annual report.
HOOPP’s property holdings in North America, the UK and Europe saw increased rental volumes and rental growth, Wendling said, citing that the fund’s residential portfolios also benefited from the recovery. economy in the Sun Belt where many people were moving.
By geography, at the end of 2021, Canada represented 56% of real estate assets in the portfolio, compared to 100% a few years ago; 30% in the United States and 14% in Europe. By type of real estate, industrial accounted for 33%; office, 29%; residential, 27%; retail, 10%; and diversified, 1%.
Non-Canadian real estate assets jumped 35% at the end of 2020.
“We have expanded the real estate portfolio both by geography and by asset type given the opportunities and returns in certain international markets,” Mr. Wendling said. This diversification, he noted, is “key to managing risk and maximizing returns. Additionally, as our real estate allocation has grown, we have had to expand our reach and look beyond Canada to find opportunities with increased market depth and strong expected returns.