Canada’s HOOPP sees a lot to like in 2 alternative asset classes

As interest rates rise in developed markets, assets such as private equity and infrastructure should outperform other asset classes, Mr. Wendling said.

Private equity was HOOPP’s top-performing asset class in 2021 and Mr. Wendling expects the allocation to increase in the coming years. Approximately 50% of the Fund’s private equity assets are located in the US; with about 25% in Europe and about 15% in Canada, noted Mr. Wendling. The remaining assets are distributed worldwide. HOOPP typically invests in private equity through funds, direct investments and co-investments, as well as other avenues such as structured equity and private debt, he added. The current private equity allocation is around 10%, but the fund has “no firm target” for how much the allocation could increase in the coming years, Mr. Wendling added.

HOOPP first began investing in infrastructure in 2019, and while it accounts for only about 2% of total assets, its allocation is likely to continue to grow in the coming years, he said.

The pension fund invests in both privately held infrastructure assets and private infrastructure funds across a broad spectrum of the asset class, he added, including U.S. renewable power generation; fiber optic communications and data infrastructure in Europe; and broadband communications and data companies in the United States

Mr. Wendling said these transactions are typically direct transactions or co-investments with strategic partners. A spokesman declined to name strategic partners.

HOOPP also finds real estate attractive, Mr. Wendling said, noting that the asset class has a 20 percent allocation of the overall fund.

As real estate recovered from the negative impact of the pandemic, HOOPP more than doubled its transaction activity in 2021 from 2020, with approximately $4.4 billion in new investments and commitments, according to its annual report.

HOOPP’s real estate holdings in North America, the UK and Europe saw an increase in leasing volume and rental growth, Mr. Wendling said, citing that the fund’s residential portfolios also benefited from the economic recovery in the Sunbelt, where many people are relocating.

Geographically, Canada accounted for 56% of the portfolio’s real estate assets at year-end 2021, up from 100% a few years ago; 30% in the US and 14% in Europe. By property type, industrial accounted for 33%; office, 29%; housing, 27%; retail, 10%; and diversified, 1%.

Non-Canadian real estate wealth jumped from 35% at the end of 2020.

“In view of the opportunities and returns in selected international markets, we have expanded the real estate portfolio both geographically and by investment type,” said Mr. Wendling. This diversification is “essential to managing risk and maximizing returns. As our real estate allocation has grown, we have had to expand our scope and look beyond Canada to find opportunities with greater market depth and high expected returns.”

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