Canada’s largest public pension fund is maintaining a busy run of asset acquisitions, using its connections in numerous markets to avoid some of the sky-high prices for assets.
Canada Pension Plan Investment Board (CPPIB) is working closely with local partners around the world to land deals in diverse industries, especially those outside the publicly-traded realm, chief executive officer Mark Machin said as the $367-billion fund released its fiscal 2019 first-quarter results.
During the quarter, CPPIB made large investments in such varied businesses as transport logistics in Brazil, renewable energy in North America and Europe, toll roads in India and a sports-league data provider based in Switzerland. Returns from the investments go to supporting retirement income for 20 million Canadian workers and beneficiaries.
The deals come at a highly competitive time in which there is more than US$1-trillion in private capital targeting investments around the world, pushing asset values higher and making it tougher for funds of all sizes to find lucrative opportunities.
“While it’s been broadly correct that asset prices have been fully valued and there’s an enormous amount of capital chasing things, because we’ve got the ability to look in a lot of different places and a lot of different asset classes and industries, we’ve been able to find interesting things in the quarter,” Mr. Machin said in an interview. The fund has built up its contacts through eight offices around the world, and has recently launched a new strategic direction that focuses on improving its ability to act quickly.
Deals included a $175-million investment in a joint venture, Goodman Brazil Logistics Partnership, targeting logistics and industrial assets in Sao Paulo and Rio de Janeiro; the $2.25-billion acquisition of 49-per-cent interests in Enbridge Inc.'s North American and German wind-energy businesses; and the purchase of a 39-per-cent stake in Sportradar, a data provider that counts basketball legend Michael Jordan, Dallas Mavericks owner Mark Cuban and Ted Leonsis, owner of the NHL’s Washington Capitals, as co-investors.
Mr. Machin said CPPIB will remain disciplined in staying in markets where it has knowledge, as opposed to venturing into smaller emerging ones. “But we continue to look for partnership with really high-quality investment partners, developers, companies. That’s one way we can create value," he said. “And the other thing is transactions that are a little bit more complicated, that take a little bit more effort.”
In the quarter ended June 30 , the fund’s net asset value increased $10.5-billion from the end of the 2018 fourth quarter to $366.6-billion.
The investment portfolio generated a 1.8-per-cent return for the quarter. The annualized return was 12.3 per cent over five years and 8 per cent over 10 years, CPPIB said.
The private assets, in real estate, infrastructure, energy and power, were particularly strong performers during the most recent quarter, Mr. Machin said. Such investments make up 23.3 per cent of CPPIB’s assets.
In the latest fiscal year, CPPIB reported a return of 11.6 per cent, with buoyant public markets contributing to the sharp gain. At the time, he cautioned that double-digit returns shouldn’t be expected every year.