Ontario Teachers Pare $1.2 Billion From Emerging-Market ETFs

May 14, 2014 7:08 pm ET

(Updates with Yale ETF addition in 9th paragraph.)

May 14 (Bloomberg) -- The Ontario Teachers’ Pension Plan is abandoning its multibillion-dollar bet on exchange-traded funds covering emerging markets.

The C$141 billion ($129 billion) pension plan cut holdings of BlackRock Inc.’s iShares MSCI Emerging Markets ETF to $390 million as of March 31, from $1.6 billion three months earlier, according to regulatory filing data compiled by Bloomberg. The reduction was more than eight times its second-largest divestiture in the first quarter. The ETF wager had climbed to as much as $2.5 billion by the end of 2012.

The Toronto-based asset manager said in its 2013 annual report that emerging markets are “shifting into a lower gear” as governments undertake structural reforms in their pursuit of more balanced growth. The fund allocated 16 percent of its stock portfolio to emerging-market public equities as of Dec. 31, more than to Canada and the U.K.

The Ontario Teachers’ Pension Plan also sold its entire $10 million stake in the iShares China Large-Cap ETF, according to filings. The retirement plan, the largest in Canada’s most populous province, returned 10.9 percent in 2013, missing the 14 percent median return for Canadian pension funds last year, according to Royal Bank of Canada’s RBC Investor & Treasury Services unit.

Wisconsin Sells

Ontario Teachers’ Pension Plan spokeswoman Deborah Allan declined to comment on the fund’s investments, citing company policy.

The pension plan had plenty of company as it pulled money from developing-nation ETFs in the first quarter. The $104 billion State of Wisconsin Investment Board, which is responsible for investing the assets of the Wisconsin Retirement System, the 9th largest U.S. public pension fund, sold its entire $349 million stake in BlackRock’s flagship emerging- market ETF in the period.

The Wisconsin investment board’s ETF position was a transition mechanism amid a changeover in external managers, and the fund’s emerging market holdings remained stable in the period as it invested in other securities with exposure to developing nations, Vicki Hearing, a spokeswoman for the Wisconsin investment board, said in an e-mailed response to questions.

The $76.8 billion New Jersey Pension Fund cut holdings of the iShares MSCI Emerging Markets ETF by $127 million and of Vanguard Group Inc.’s $43.3 billion FTSE Emerging Markets ETF by $445 million in the span, filing data show.

Yale University, the world’s second-wealthiest school with a $20.8 billion endowment, boosted holdings in the Vanguard fund by $100 million in the period to $128 million, filings show.

--With assistance from Katia Dmitrieva in Toronto and Michael McDonald in Boston.