UPDATE 2-CPPIB returns boosted by equity gains

Fri Feb 15, 2013 2:49pm EST

* Qtrly performance boosted by Petronas-Progress deal

* CEO says fund will continue to diversify its portfolio

* Net assets in fiscal Q3 rise to C$172.6 bln

By Euan Rocha

TORONTO, Feb 15 (Reuters) - The Canada Pension Plan Investment Board, one of the world's biggest pension funds, said on Friday investment returns grew in its fiscal third quarter as global equity markets strengthened.

Returns for the period, ended Dec. 31, received an added bump from one of the largest energy deals of 2012 - the takeover of Canadian natural gas producer Progress Energy by Malaysian state oil company Petronas for C$5.17 billion ($5.16 billion).

CPPIB, which manages Canada's national pension fund, said it had made C$384 million in equity investments in Progress in 2010 and 2011. It sold these investments for C$780 million, when the Petronas-Progress deal closed late last year.

The fund manager said it ended the quarter with net assets of C$172.6 billion, up from C$170.1 billion at the end of the previous quarter.

CPPIB and its Canadian pension fund peers like the Ontario Teachers' Pension Plan and Caisse de dépôt et placement du Québec have been among the world's most active dealmakers in recent years, making major bets in Canada and abroad.

The investments have focused largely on real estate, natural resources and infrastructure. CPPIB has however also invested in some more unconventional areas. Last year it announced two major investments in the world of motor racing.

"Our goal is to continue to diversify the portfolio both by asset class and by geography with a slowly increasing focus on global growth markets," said CPPIB Chief Executive Mark Wiseman, in an interview.

STRONG QUARTER

CPPIB said the C$2.5 billion increase in its net assets in the quarter came from C$5 billion in investment income, after deductions for seasonal cash outflows. The fund routinely gets more contributions than are required to pay benefits during the first part of the calendar year and then remits a portion of those funds for benefit payments toward the end of the year.

"We continued to see solid returns this quarter due to strong increases in global public equity markets and income generated by the portfolio's private assets," said Wiseman, adding that all CPPIB's investment groups delivered gains in the period.

Wiseman, who just returned from the World Economic Forum in Davos, said he was surprised by the level of optimism from U.S. business heads attending the annual brainstorming and networking event in the Swiss Alps.

"I would suggest anecdotally speaking, that the view from corporate America is much more positive than what the economic numbers have borne out thus far," said Wiseman, adding that the outlook for Europe however still remained gloomy.

"The amount of work that needs to get done to get Europe back on a solid growth footing is enormous," said Wiseman. "I continue to come away with the impression that Europe will continue in recession and if there is a light at the end of the tunnel it is a heck of a long tunnel."