Toronto, Ont.-based University Pension Plan’s fiscal 2025 results offered an early glimpse into how its total portfolio approach shapes capital allocation, directing investment to opportunities the pension fund believes are best positioned to support long-term member outcomes rather than predetermined asset-allocation targets.
Infrastructure was the portfolio’s best-performing asset class in 2025, returning 20.8%. Aaron Bennett, UPP’s chief investment officer, said the performance reflected investments made before sectors such as renewable energy and data infrastructure became market favorites.
Those investments weren’t selected because they were fashionable, he said, but because they offered the long-term, inflation-linked cash flows needed to support the pension plan’s funding objectives.
“Our purpose is always long-term resilient, sustainable funding of pensions for our members,” said Bennett. “That means that we have to think about things beyond, well, did you beat the market? Did you beat the S&P or the TSX?”
For the year ended Dec. 31, 2025, UPP remained fully funded with a surplus and generated a total portfolio net return of 5.2%, contributing to a three-year annualized return of 8.5%. Net assets increased to C$13.5B from C$12.8B a year earlier. Strong contributions from infrastructure, public equities, absolute-return strategies and private debt helped offset performance in private equity, fixed income, inflation-sensitive bonds and real estate, illustrating how the fund’s total portfolio approach balances risk across the portfolio.
Under UPP’s investment framework, opportunities are first evaluated on traditional measures such as expected returns, fees, alignment of interests and due diligence. The analysis then expands to assess how an investment contributes to the broader portfolio and the plan’s long-term objectives. Bennett said the ultimate question is how each investment contributes to UPP’s ability to achieve its absolute-return target and maintain a funded ratio of 100% to 110%.
“That’s what determines the sustainability of the funding,” he said.
One of the key characteristics UPP seeks across the portfolio is inflation protection. Because Canada no longer issues real return bonds, Bennett said the pension plan must find alternative ways to protect its ability to provide inflation-linked benefits to members.
When evaluating real estate investments, for example, the team asks not only whether an asset is attractive on a standalone basis but also how it contributes to the fund’s overall inflation exposure and funding resilience.
“We ask, where does the connection to inflation come in here and how does that impact our overall exposure or risk that we’re taking in the fund on inflation relative to what we need to fund the pension?” said Bennett.
That philosophy also influences where UPP chooses not to invest. While the pension plan maintains target allocations across asset classes, Bennett said opportunities must clear a higher hurdle than simply fitting within a bucket.
“Just because there’s a bucket for real estate, for hedge funds, for private equity, doesn’t mean we’re going to fill it up,” he said. “We’re going to focus capital on the opportunities we believe are best positioned to generate the long-term, steady returns the fund needs.”
Advances in risk systems, data analytics and artificial intelligence have made it easier for investment organizations to analyze opportunities across asset classes. The greater challenge, Bennett said, is building a culture and governance framework that encourages investment professionals to prioritize total-fund outcomes over individual asset-class mandates. “It still comes down to people and governance.”
An integrated responsible investing program helps UPP’s investment teams identify financially material risks and opportunities across asset classes. That capability proved particularly valuable for the fund as some institutional investors retreated from environmental, social and governance opportunities amid shifting political and market sentiment. UPP remained focused on its responsible investing priorities, increasing its commitments to climate solutions. In 2025 alone, the plan committed more than C$100M to climate solutions without compromising its return objectives, bringing total commitments to C$762M and advancing its goal of reaching C$1.2B by 2030.
By year-end 2025, the market value of UPP’s climate solutions investments portfolio reached C$850M, up from C$527M in 2024, an increase that stems from both new investments and growth in the value of the pension fund’s existing holdings, according to its latest annual report.
Bennett also pointed to UPP’s investments tied to renewable energy and data centers, where the fund identified opportunities arising from growing demand for power and AI infrastructure. Factors such as community engagement, power availability and local infrastructure can have a direct impact on project economics, he said. Developers that fail to address concerns around power prices, water access or construction impacts can face delays, cost overruns and community opposition that ultimately reduce returns, he added.
“If you don’t think about that, you’re going to get hit with delays. You’re going to get hit with disruptions and that’s going to, at a minimum, push out timelines and compress your IRR.”
Looking across asset classes also helps the fund allocate resources more effectively. UPP’s private markets teams operate under a unified leadership structure, allowing investment professionals to move between projects as opportunities emerge.
“If there’s lots going on in infrastructure right now, not so much in private equity, maybe someone from private equity wants to go over and help the infrastructure team because that’s where we’re seeing the most interesting opportunities,” said Bennett.
The fund can also shift resources between active equity strategies and absolute-return investments depending on where it sees the strongest opportunities, an approach he said is particularly valuable as benchmark returns become increasingly concentrated in a handful of large-cap technology stocks.
Investment organizations that remain structured around asset-class silos will find it increasingly difficult to adapt compared with those organized around total-fund outcomes, said Bennett.
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