Pension Innovation Hugh O Reilly President and Chief Executive Officer OPTrust
About OPTrust A defined benefit and jointly sponsored pension plan With almost 90,000 members and retirees * 2016 Top 100 Pension Funds Report (Benefits Canada) 5 th largest public sector pension plan in Ontario one of the top 15 public sector pension funds In Canada* a diversified portfolio 58.5% Public Markets * Cash and short-term investments $19B As at December 31, 2016 15.1% Real Estate 10.8% Infrastructure 8.4% Private Equity 7.2% Other** Our mission: Paying pensions today, preserving pensions for tomorrow. 2
There is a surge in innovation that is reconfiguring the global economy A mindset, cultivated through a healthy culture Adapting and responding to rapid change 3
Strategic Plan Our strategic plan sets out a long-term vision and is designed to guide our efforts over the next five years, keeping us focused on our mission: paying pensions today, preserving pensions tomorrow. We plan to achieve our innovative aspirations through: Creating an idea-rich environment Innovation in our investing activities Service innovation to evolve our model 4
Pension Innovation Goal To become the world s most innovative pension organization by 2022, with a demonstrated ability to employ innovative thinking to enhance the longterm sustainability of the plan. Pension industry not historically known for innovation Innovation is the most critical skill we seek to develop over the next five years Innovative thinking will fuel our growth efforts, creating new ways to enhance plan sustainability 5
Current State Innovation is not the future, innovation is here we live in an innovative world, which makes us think better, operate at our best and ultimately provide better service to our members. Member-Driven Investing Strategy Responsible investing Climate change paper Internal commitment to staff development Incubation Portfolio 6
Incubation Portfolio A new portfolio to house investment strategies that do not otherwise fall within an existing asset class Preliminary allocation is approximately 1.5% of the total fund Canada is the second-most successful country in the world for start-ups but among the poorest in implementation We want to help change that Increase our exposure to innovative ideas learn how innovation is working in other fields to improve our own operations 7
Member Services Our member services team is ranked in the top-10 globally for the service it provides the Plan s members. Over the next three to five years, we will strive to reach the top-five, while maintaining the same high level of service standards Key driver to achieving this success will be our ability to meet evolving expectations of members across generational cohorts With the acquisition of ownership in JEA, our pension administrator system, we have an opportunity to change the way we communicate to our members We envision a future state where OPTrust supports an online community and portal for its members and employers 8
Risks While the creation of technology captures our imagination, understanding possible disruptive aspects of new technology is critical. Potential risks have been identified. Business Model Assess investment opportunities based on long-term potential vulnerabilities in our current portfolio and evaluation of new investments Obsolescence of Certain Economic Indicators Innovation is disrupting traditional methods of measuring economic growth Emerging Markets Geopolitical assessment and knowledge will be of importance 9
Measuring Success For innovation to succeed, we believe the best approach to managing innovation risk is to: Reinforce the risk-conscious culture Employ tools like pilots and proofs of concept Formally share learning from innovation efforts across the organization Provide transparent reporting on the outcomes of innovation efforts to the board and entire organization 10
Conclusion When making investment decisions about established companies and assets, it is common to examine track records of products and finances to evaluate success these are indicators of past success Innovation is the mindset of investing in the future versus the past Need more emphasis on assessing intangibles, such as relationships and skill sets, in addition to underlying fundamentals when evaluating new technologies Need foresight to see how technology will evolve in the verticals for which it was designed as well as to assess how the technology can be applied to other verticals and evolve 11
Questions? 12