CPPIB chief executive officer Mark Wiseman.The Canadian Press
As the markets of Asia and Latin America grow in importance, the Canada Pension Plan Investment Board is increasingly looking for opportunities in the regions, says chief executive officer Mark Wiseman.
The 18 million Canadians who look to the CPPIB to invest their retirement savings may think of it as a domestic fund. But while many of its assets are indeed in the home market, CPPIB also wants to diversify and become a global investment organization.
The CPPIB, which manages $172.6-billion, posted a return of 3 per cent in its third fiscal quarter, a gain that was boosted by improved global equity markets. The S&P/TSX index rose roughly half a per cent in the same period ending Dec. 31.
The challenge for Mr. Wiseman is to predict where the best returns will be 25 to 50 years from now and invest accordingly. Some regions are sure things: "It's tautological at this point, for example, that China will be the largest economy in the world ... it will surpass the U.S. the be the largest economy," Mr. Wiseman said in an interview. "We're preparing for that."
But Latin America is also a key area, with Brazil, Chile, Colombia increasingly coming into focus. Mr. Wiseman identifies these as economies set to " grow at rates quite frankly that are far greater than rates we expect to see in North America."
So even though the majority of the portfolio has been, and will continue to be, invested in developed markets, CPPIB is thinking ahead to build up capabilities in the areas. "I think over time you'll see an increasing proportion, albeit minority, of activity in the growth markets," he said. In the quarter, CPPIB agreed to two joint real estate ventures in Brazil with an investment of more than $340-million.
The fund has 49 per cent of its money in public and private equities. It has invested another 34 per cent in fixed income and 17 per cent in real estate and infrastructure.
Mr. Wiseman is less enthusiastic about real estate. While the asset class did increase its share of the overall asset mix in the third quarter, Mr. Wiseman indicates that real big breaks in the space are getting harder to come by. That's especially true in properties such as class A office buildings in key markets, which would be of interest to CPPIB. Competition and prices are both on the rise, he said. "And that means decreasing expected returns. If anything we're picking our purchases in real estate very carefully."
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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