Political risks in the United States, exacerbated by President Donald Trump’s struggles to pass key reforms amid a major federal investigation, are not deterring the manager of one of Canada’s largest pension funds from being bullish.
Hugh O’Reilly, president and CEO at OPTrust, spoke to CNBC on the sidelines of the Milken Institute Asia Summit 2017. He said the strong foundations of the U.S. economy inspire investor confidence.
“There’s a lot of political change happening in the U.S.” O’Reilly said, also pointing to changes in the U.K. and Europe. “We think the United States is one of the strongest, it’s a leading economy in the world … and it has a lot of structural advantages.”
He added that, in the U.S., the “system works,” and he thinks it’s “well-run” and transparent.
“We understand the risks we’re taking on and we’re confident in the investments we’ve made,” he said.
Many investors have voiced concerns about overvaluations in the market, which are tied to elevated risks. But, O’Reilly said, it is a global phenomenon affecting other regions too.
OPTrust is the administrator and fund manager of the Ontario Public Service Employees Union Pension Plan. It has net assets of 19 billion Canadian dollars ($15.6 billion) and has a diversified global investment portfolio including stocks, currencies, fixed income, infrastructure, real estate and private equity.
Recently, lawmakers in Washington D.C. prevented a government shutdown by backing a bill that raised the country’s borrowing limit for three months as well funding the government and providing $15.3 billion in aid for victims of Hurricane Harvey.
But research from ratings agency Moody’s suggested that the bill could likely dash any plans for tax reform — one of the major campaign promises for President Donald Trump — before the end of the year.
Earlier in the year, lawmakers failed to repeal and replace the Affordable Care Act, which was another major campaign promise for the president.
Beyond the U.S., O’Reilly said Asia Pacific is a key investment destination for the fund given that the region houses nearly two-thirds of the world’s population and has a little over a third of the global gross domestic product. OPTrust has an office in Sydney.
“We have a significant exposure in Asia,” he said. “We have significant infrastructure and private equity investments. We also have some direct infrastructure investments in other areas in Asia, as well as private equity.”