Long-term investments in countries with high-growth, emerging economies will help the Canada Pension Plan Investment Board through unpredictable times, CPPIB’s CEO said Friday.
Mark Wiseman, who oversees one of the country’s largest investment portfolios on behalf of the Canada Pension Plan, says his organization is looking for “where the puck is going to be, not where the puck is.”
“It’s the proverbial Wayne Gretzky approach to investment,” Wiseman said in an interview after CPPIB released its report for the third quarter of its 2013-14 financial year, which ends March 31.
Wiseman said the fund’s plan is to increase its investments in countries such as China, India and Brazil.
“We’re building our capabilities up in those regions, building our investment partners in those regions (because) in the long run we believe it will pay off,” Wiseman said.
“We believe in the economic growth of those economies will exceed the growth that we are seeing in developed markets like North America, Europe and Japan.”
Earlier this week, the board announced that it has committed US$250 million to a fund that will provide debt financing for residential projects in India’s largest cities. The fund will focus on developments in the Delhi national capital region, Mumbai, Bangalore, Pune and Chennai.
In its latest earnings release, CPPIB reported it had $201.5 billion of assets under management at the end of December, up from $192.8 billion at the end of September, and earned a 5.9 per cent return for the three months ended Dec. 31.
This is the first time CPPIB, which was created in 1997, has surpassed $200 billion in net assets, which included $11.1 billion in net investment income in the latest quarter.
CPPIB invests money not currently needed by the Canada Pension Plan to pay benefits for some 18 million current and retired contributors from most provinces.
Quebec has a separate system, with asset management performed by the Caisse de depot.
The Canada Pension Plan has historically paid for retirement benefits from payroll contributions made by employees and employers but, as the population ages, it will eventually also draw on its investments.
The Chief Actuary of Canada currently estimates CPP contributions will pay for benefit payments until 2022.
Wiseman said the third quarter’s return of 5.9 per cent far exceeds the second quarter’s return of 1.8 per cent but the real issue is the fund’s performance over the long-term.
“We’re going to have quarters where we have low returns. We’re going to have quarters where we have higher returns. It’s part of having a highly diversified portfolio,” Wiseman said.
“Our job at CPPIB is to construct a portfolio that will be diversified and will produce a risk adjustment return, not over the proverbial 90 days but over decades and quarter centuries.”
CPPIB’s major deals in the third quarter included the acquisition of Assiniboia Farmland LP, a fund manager that owns a portfolio of agricultural lands in Saskatchewan, for $128 million.
It also spent $468.2 million for a 15 per cent stake in ORPEA SA, a European long-term care provider and acquired a half-interest in an Australian property portfolio valued at $2.74 billion.
CPPIB also recently opened offices in New York and Sao Paulo, Brazil, as it continues to grow its global presence and focus on international investments.
Meanwhile, in the new year, the board’s strategy will be headed by Ed Cass, who will take over as chief investment strategist and senior vice-president beginning April 1. Donald Raymond will leave the position at the end of March for a job at hedge fund manager Alignvest Management Corp.