Have Bonds Turned Attractive? This Canadian Pension Fund Giant Certainly Thinks So

The Ontario Teachers’ Pension Plan, one of Canada’s largest pension funds, is reportedly increasing its exposure to bonds, citing yields that have turned attractive following the worst sell-off in a generation.

What Happened: OTPP, which manages C$243 billion ($177 billion), is raising its holdings of inflation-protected debt, along with some investment-grade and junk notes, the fund's president and CEO, Jo Taylor, said, according to a Bloomberg report.

The move comes after the fund trimmed the weightings of bonds last year in favor of infrastructure and property investments to hedge against inflation, as per the report.

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“What do we think about bonds? ... getting more attractive. We’ll probably increase our allocation to fixed income a little bit but we are still lightly allocated compared to what we might have been,” Taylor was quoted as saying.

Holdings: The fund’s top holdings include GFL Environmental Inc GFL, Microsoft Corporation MSFT, and Amazon.com, Inc. AMZN according to whalewisdom.com.

OTPP plans to shift into longer-term bonds after earlier seeking refuge in shorter-duration debt to better withstand the surge in borrowing costs. “We may change that a little bit, where we are picking to have longer-duration bonds because they offer us interesting interest rates,” he said, citing Australian government bonds yielding 4% to 5%.

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