If the world is so turbulent, how can one invest?
Jo Taylor: Long-term planning is good, and hopefully the turmoil we are seeing at the moment may be shorter in nature. If defined and continuous for a period of time, you can handle changes in transactions more easily. It’s hard to legislate for this when you’re not sure what the final location is. And some businesses are larger than others. If you are in the manufacturing business with many sub-component parts, it is difficult to know if you can absorb the input costs of all possible increased product and final product costs. Therefore, we are planning to conduct a long-term personal asset group. This means we refresh and review our work in each asset class and our strategic geography, which is regularly in India. It is our job to make sure we have the right composition of what we are creating, which is essentially a quasi-round portfolio that handles volatility triggered from events.
Jo Taylor CEO, OTPP (left) and Deepak Dara of India’s head, OTPP
Geopolitical risks are your most concerned issue today…
JT: Yes, especially when you manage a global and diversified portfolio like us. But again, I will carefully observe where inflation goes. Will this be an inflationary environment with lower growth? This is not an easy environment and can get higher returns. It is important to keep the course and do what we think we do right and do it the right way, not to be too much influenced by the opinions of the outside people.
Interestingly, you may invest more money to work in India when diplomatic relations with Canada become cold. For India’s OTPP, 2024 is obviously an outstanding person. Most people are very surprised by the timing of your aggression.
Deepak Dara: We have a deep relationship with the Indian government, which makes us very comfortable. We never see any risks in overall investment, which is why we continue to be comfortable. As long as we think we are paid for risk and we have an accurate way to evaluate it, we have the balance sheet and liquidity to make these investments. Finally, we really try to stay apolitical in our activities.
OTPP is a sponsor of several global and Indian funds. Is it better to work closer with them to invest or increase allocations than to make direct investments to offset risks?
JT: We are currently directly controlling investors’ investments. We will also invest as an important partner or two as important minority investors. Moreover, we also invest as smaller minority investors, more on our risk growth strategy, after the initial A, B capital round, we may invest in businesses with earlier investors.
If you look at the world where all the uncertainties exist today, what can you consider? The first thing we try to consider is that if we want to control the business, we just need to be prepared to actually apply value-added and growth support, and growth support for OTPP is really important to fulfill our obligation to always try to make our business better at the end of ownership. One of the problems with such a goal or effort is that such heavy lifting does take up manpower – so there is an extended problem.
Investing through fund relationships or fund partners rather than ourselves allows us to better understand the industry or geographical location so that we can actually get paid for the risks we will take. In an uncertain world, what you do with a smart friend or partner can actually give you more confidence. It can help you assess risk. Then, the last thing is that even with OTPP, we have very good liquidity, we always regard every dollar invested as a scarce resource.
How do you choose a partner?
JT: If we are going to invest with them, they have to answer some questions for us. The first one is, are we really consistent? Do we have the same timeline when it comes to sticking to investment? What are the key things we think we have to try to help businesses change? We think what is the value we can create in our business, so when exits may be appropriate, we stay consistent. If we can’t do that, then I think it might not be a good idea to fight for a specific opportunity with that partner. So we try to go back to partners who do this regularly, not those who do this regularly. It allows us to look at each field and actually say, at this particular moment, at the level of uncertainty around us, internationally and in a particular region or country, what is the best tactical approach? We can and we do actually adopt different approaches in different countries, but the point I’m trying to make is that we are currently working to take into account the risks seen in the world.
Did this strategy make a big difference six months ago?
JT: In any sense, what we are going to do today is not a comprehensive overhaul of our investment strategy, but I think six months ago, we might be more confident in taking a bigger position in the company because we can understand their risks and growth potential. But what do investors usually do when things get complicated or more obscure? You may try to lower the amount you may submit on margin, which we do from time to time.
Do you expect global order and the collapse that follows?
JT: I’ve been the CEO of OTPP for about six years and there are some interesting things every year. First of all, this is a big deal. Then we put very radical inflation to levels that we have never really seen in years. Now, I think our geopolitical situation is more complex and amplified to be navigated and understood. You have to remember that OTPP is a very long-term business.
