Five Examples of Direct Value Creation and Capture in the Pension Fund Industry

Abstract

How can pension funds create and capture value in financial markets? We study four landmark transactions made by large Canadian pension funds: OTPP’s acquisition of Cadillac Fairview, PSP’s development of Mahi Pono, CDPQ’s development of Réseau Express Métropolitain, and CPP Investments’s acquisition of Antares Capital. The funds create and capture value by achieving scale in strategic markets, reducing fee drag, coordinating stakeholder groups, and developing internal synergies. We identify the primary risks, discuss the risk mitigation strategies implemented by the funds, and then study how UPP, a smaller pension fund, emulates some of these strategies on a smaller scale.

Keywords: Pension Funds, Innovation, Long Term Value Creation

JEL Classification: G23