CPP fund manager looking to Mexico, India
The Canada Pension Plan fund manager expects to focus its investments on global markets over the coming years as it seeks to shelter itself from cyclical downturns at home and meet its 2020 benchmark value of $320-billion.
David Denison, president and CEO of the Canada Pension Plan Investment Board, says the board will focus on global markets for its investments.
The investment model is being lauded by New Brunswick business officials, who affirm confidence in the ability of the fund's private-sector board to ensure long-term sustainability of pensions.
The fund is concentrating on commercial real estate across Europe and infrastructure projects in countries like Mexico and India, says David Denison, president and chief executive officer of the Canada Pension Plan Investment Board.
The board currently manages a roughly $123-billion fund, with about $58 billion invested across the globe in public and private equities, infrastructure, real estate and inflation-linked bonds.
The investment strategy for Mexico and India will focus on sectors in which the fund currently isn't active, Denison said in an interview this week.
Initial investments in Mexico, where the fund is focused on industrial real estate, will likely target existing infrastructure projects, potentially utilities, with plans to become directly involved with development of new ones at later stages, he said.
In India, where the fund owns no assets, investments will likely flow to existing airports, with longer-term plans to build a new airport, highway or seaport, said Denison.
"Over time, we will get involved with the development of infrastructure; they are green-field operations right now," he said.
"We're also looking at Turkey, which is a big country with (70 million) people and a rapidly growing middle class. Retail is a great investment opportunity for us, because they don't have the shopping centre facilities we take for granted in the developed world."
The investment board's global focus is designed to reap greater returns and diversify its portfolio. Canada represents less than three per cent of global capital markets, Denison said in recent speech in Halifax, and investing internationally gives the board access to markets, such as technology, health care and consumer goods.
These markets, he said, aren't well represented in Canada's markets, which are heavily concentrated in a few sectors, including natural resources and financial services.
The move is also meant to shelter the fund from cyclical downturns in the Canadian economy and generate investment income abroad, rather than home, and use the funds to pay for pensions in Canada.
The investment board, meanwhile, currently has more than half of its investments - $65 billion - invested in Canada, including 700 public companies and $600 million focused on venture capital.
"The board appears to be make a varied number of investments all over the world, with a long-term view, which will mean that our pension fund will grow as least as well as the averages," said Derek Oland, chairman of Moosehead Breweries. "Canada should be proud and comforted with the way the Canada Pension Plan Investment board is handling our money."
Not all Canadians share Oland's confidence, however. An Ipsos Reid poll conducted last week found 40 per cent of respondents believe the CPP will be out of money by the time they retire. More than 60 per cent reported the pension was not successfully reformed 10 years ago.
During that period, Canada's chief actuary estimated the CPP would have been insolvent by 2015. Concerns over the pension's survival sparked public outcry, but they were answered with reforms. In 2005, when legislation requiring Canadian content in pension investment funds was repealed, the CPP investment board started looking global.
The chief actuary's 2006 report revealed the plan is sustainable for the entire 75 years covered by the forecast.
A central strategy in this turnaround is the investment board's commitment to make investments itself, rather than focusing on other investors, such as private equity funds. The switch is commonly referred to as an active, rather than passive, investment strategy.
"We are lucky to have a CEO of the calibre of David Denison running this fund for us," said David Hay, president and chief executive officer of NB Power, who attended a breakfast meeting with Denison this week. "I felt he demonstrated a very clear vision of what they are doing, which is moving from a passive investment mentality to an active one."