December 10, 2015 / 7:21 PM / 2 years ago

Canadian pension fund HOOPP CEO sees value in oil assets

TORONTO (Reuters) - Weak crude oil prices are creating opportunities for long-term investors in the oil and gas sector, the chief executive of one of Canada's ten biggest pension funds said on Thursday.

Oil prices touched multi-year lows this week but Jim Keohane, chief executive of the Healthcare of Ontario Pension Plan (HOOPP), said that the prolonged weakness is making valuations of oil and gas-related stocks attractive and revealed HOOPP is considering upping its investment in Canadian equities in response.

HOOPP is Canada's seventh-biggest public pension fund, managing assets worth C$61 billion ($45 billion). Its returns are among the highest achieved by Canada's top pension funds and its investment strategy is closely watched.

"There is a decent opportunity with oil right now so we're actually thinking about dialing up our Canadian equity exposure which we've taken down for the last few years," Keohane said in an interview.

"If you have a long-term time horizon it's not a bad time to be buying those types of assets," he said.

Research from Boston Consulting Group recently showed Canada's ten biggest public pension funds had tripled in size since 2003 and now manage assets worth over $1.1 trillion.

The executive said a key factor in the Canadian funds' success has been their ability to buy assets for long-term ownership at times when they are available at "reasonable" prices, having built up sufficient scale over the past two decades.

That strategy could be used to invest in Canada's energy sector while oil prices are depressed, he said.

"If things are low right now they can be very high somewhere in the future. You just have to make sure you are buying assets with cash flows that can get them through the down period," Keohane said.

Canadian pension funds have not escaped the near-term hit from the global commodity price plunge and recent market downturn. Research by RBC in November revealed they had suffered a second consecutive quarterly fall in the value of their assets for the first time since the 2007 to 2009 financial crisis.

"Current markets are pretty challenging," said Keohane. "Generally speaking we're being cautious right now because we think valuations overall are reasonably high. The background fundamentals don't look particularly strong."

"Real estate is very highly valued, infrastructure is very highly valued, credit's highly valued," he said. "If you're not being paid to take risk don't take it.

Hugh O'Reilly, the CEO of OP Trust, another of Canada's top ten public pension funds, said on Wednesday that investors risked overpaying for infrastructure assets in an "overheated" global market.

Reporting by Matt Scuffham; Editing by Bill Rigby

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