The Canada Pension Plan Investment Board committed $364-million on Monday to a fund that will buy Australian warehouse, the latest in a series of acquisitions that see domestic public sector plans invest directly in foreign assets.
Funds such as CPP Investment Board, the Ontario Teachers Pension Plan, OMERS and the Caisse were traditionally passive investors in foreign markets, farming out portfolio decisions to external managers. The approach has changed in recent years, with the country's largest funds shifting to direct ownership, or at least control, when they invest in alternative assets such as real estate, infrastructure, private equity and hedge funds.
The latest example of this trend saw CPP Investment Board make an initial commitment of $200-million (Australian) or $180-million Canadian to a fund that will be run by Australia's Goodman Group. The mandate is to invest in logistics facilities, such as warehouses. The fund's first investment is a $66.3-million (Australian) stake in a distribution centre currently being built for Kmart in Melbourne.
CPP Investment Board will hold an 80 per cent stake in the new venture, which will be called the Goodman Australia Development Fund. Sydney-based Goodman will hold the remainder. So while CPP Investment Board is still outsourcing portfolio mangement to a local firm, there is no question of who is utimately calling the shots at the Goodman fund from a governance point of view.
Last year, CPP Investment Board and Goodman teamed up on an China real estate fund. The Australian real estate company owns or manages a total of 331 properties, worth $16.3-billion (Australian).
CPP IB has made a number of direct investments in the logistics space, including a $323-million (Canadian) takeover last year of Livingston International Income Fund, a Toronto-based company that does customs brokerage and transport. CPP Investment Board teamed up with U.S. private equity fund Sterling Partners on that purchase. Livingston is seen as a consolidation play in the sector - it has 2,500 employees at 100 locations in Canada and the U.S., including airports. border crossings and ports.