Canada Pension Plan Investment Board is investing in a river and ocean cruise company, marking the pension fund's first private investment based on its thematic investing strategy.
CPPIB said Monday that it would team up with alternative asset manager TPG Capital to jointly invest $500-million (U.S.) in Viking Cruises, which operates more than 60 vessels in dozens of countries and has plans to expand.
The deal had to meet all of the criteria that would usually be applied to a private equity deal at CPPIB, but the transaction is unique in that it also had to be related to one of the long-term macroeconomic trends the pension fund has identified as likely to affect its future investments. It is the first of many private market deals for the thematic investment team, which was formed in 2014 and is expected to grow to be a multibillion-dollar asset management group.
In the case of Viking Cruises, the initial theme was evolving demographics, said Pierre Lavallée, global head of investment partnerships at CPPIB, who oversees the thematic group. In many parts of the world the baby boomer generation is aging, pushing up the median age in developed countries such as Canada and the U.S.
CPPIB then thought about the increased number of retirees and their inclination to travel as part of its investment into Viking Cruises, which designs trips for passengers with interests in geography, culture and history. Viking Cruises was founded in 1997 and works with travellers across North America, Britain, Australia and China.
Many members of the boomer generation also have robust disposable incomes, exhibiting "big spender behaviour," Mr. Lavallée said.
In thematic investing, CPPIB asks "are there ways we can invest behind that structural change in a way we think our investment will be favoured by the evolution of the demographic change?" Mr. Lavallée said. "Then you still need to make sure the company is a good company, that management is strong, that the strategy is solid and that we'll get a good return for our investment on a risk-adjusted basis."
The thematic investing team's other significant focus is on the trend of "innovative disruption," or the impact of technological change on industries that creates investment opportunities.
Mr. Lavallée said the thematic investments team passed on several private deals before settling on Viking Cruises. The group initially made only public market investments, through Mr. Lavallée will not disclose the companies CPPIB has taken stakes in. More than $1-billion has been invested since the group's inception.
"This is a program we think could have several billion dollars invested in the next several years," Mr. Lavallée said.