CPPIB notches 16.5 pct return, eyes developing markets

  • Large amounts of capital chasing investment opportunities
  • Canadian pension in eighth year of active management
  • Foreign assets make up 69 percent of portfolio

The Canada Pension Plan Investment Board, one of the world’s biggest dealmakers, said it is hard to find good deals because most assets are fully priced, but it will be patient and focus on emerging markets to find deals that offer long-term value.

CPPIB, which manages Canada’s national pension fund, said on May 22 that its assets rose to a record C$219.1 billion ($201.39 billion) at the end of fiscal 2014, as its investment portfolio returned 16.5 percent for the year ended March 31, sister news service Reuters reported.

Chief Executive Mark Wiseman said CPPIB will put a disproportionate amount of effort into finding deals in developing markets because its long-term investment horizon allows it more time than many competitors to reap the benefits. “We are continuing to try and develop our portfolio in growth markets, places like India, Brazil, China. We see those markets providing good long-term value for the fund over all,” Wiseman told Reuters following the release of the fund manager’s results.

CPPIB opened an office in Sao Paulo in April to access Latin American markets including Brazil, Peru, Chile, Colombia and Mexico. Wiseman said the flow of acquisitions will likely remain subdued in 2015 because competitors have come back into the market after stepping back in the wake of the financial crisis, and there are large amounts of capital chasing investment opportunities.

“In my career as a investor this is probably the tightest market to operate in as a value investor,” he told reporters. “Assets are by and large fully priced … and if I had to use one word to describe the mentality around here it is ‘patient.’”

The fund manager struck 103 global deals in fiscal 2014, 45 of which were over C$200 million. Wiseman said CPPIB will focus on assets like infrastructure, real estate and private equity, and build out its public market capabilities in those developing markets.

The eighth year of active management of the fund has boosted foreign assets to 69 percent of the portfolio, while Canadian assets make up 31 percent of the book. The 16.5 percent 2014 investment gain was up from 10.1 percent a year earlier and its fifth straight gain after the fund manager suffered losses in 2008 and 2009.

Investment returns were led by a 36.8 percent gain in private emerging market equities, a 35.1 percent rise in private foreign developed market equities, a 30.1 percent gain in Canadian private equities, a 26.3 percent gain in public foreign developed market equities, a 20.0 percent gain in “other debt,” an 18.0 percent gain in real estate and a 16.6 percent gain in infrastructure.

Weaker parts of the portfolio included investments in Canadian public equities, which returned 15.6 percent, public emerging market equities, which returned 5.8 percent, bonds and money market securities, which returned 0.3 percent, and non-marketable bonds, which notched a negative 0.1 percent return.