THE ECB has heavily hinted that it will provide more support to markets on Thursday, although how the support will look has yet to be determined. I had Ron Mock, chief executive of the Ontario Teachers’ Pension Plan, a $145bn fund that manages pension savings for over 300,000 current and retired teachers in Canada, on European Closing Bell, and spoke to him about the impact of rates on a fund as big as his. Granted, we are in a benign environment for markets, but what happens when, the ECB aside, central banks start the normalisation process and interest rates head up?
“It depends why rates are heading higher,” Mock told me. “If rates are heading higher out of growth, you can weather that for quite some time. We have liabilities, though. And our liabilities go in the opposite direction of interest rates. If interest rates are going up, it might slow the portfolio growth down, but it actually helps the liability side of our balance sheet. For every 1 per cent movement in interest rates, our liabilities move around $30bn.” In other words, for the Ontario Teachers’ Pension Plan, a rising interest rate scenario is not the worst thing that can happen.
INVESTING IN UK RAIL
Mock’s fund favours long-term infrastructure projects, as reflected in its ownership of the Channel Tunnel Rail Link, Bristol Airport, Birmingham Airport, and Copenhagen Airport. I asked him if he would be interested in investing more in UK rail projects. If HS2 comes along, he said, “clearly, we would like to look into that as an opportunity”.
IN CONVERSATION WITH WILL.I.AM
With Apple’s $3bn purchase of headset maker Beats Electronics, I had the pleasure of having Will.i.am, multi-award winning artist and one of the three original co-founders and equity partners, in the studio with me soon after the deal was announced. While he remained mum on how big a stake he has in Beats, he was happy to talk about how technology and culture are merging more than ever. As Will.i.am put it, “Beats changed airports” – suddenly, it is not uncommon to see people wearing the large, multi-coloured “pop” headsets in them. A new culture has been born. “Without culture, tech just sits at home on a shelf. When tech and culture merge, a powerful force comes alive,” he said.
Some might argue that Beats “sold out”, and that it is ironic that Apple, which itself originally gained traction by producing a culture where entire populations were suddenly seen wearing tiny white headphones in their ears, is the buyer. But Will.i.am said the fit was natural. After all, it was Will.i.am’s group The Black Eyed Peas that launched both iTunes and the iPod with an ad using their song Hey Mama.
Louisa Bojesen is presenter of CNBC’s European Closing Bell. @louisabojesen