CPPIB notches 10 percent return, eyes infrastructure, private equity deals

TORONTO Thu May 16, 2013 5:30pm EDT

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TORONTO (Reuters) - The Canada Pension Plan Investment Board, one of the world's biggest dealmakers, said a glut of cheap capital may mean it makes fewer big purchases in 2014, but it sees big opportunities in global infrastructure and private equity in the months ahead.

CPPIB, which manages Canada's national pension fund, said on Thursday its assets rose to a record C$183.3 billion ($180.12 billion) at the end of fiscal 2013, as its investment portfolio returned 10.1 percent for the year ended March 31.

Chief Executive Mark Wiseman said CPPIB may be slightly less active in dealmaking in the coming year because there is a lot of capital flowing globally and prices are up, but he said the fund will use its scale and long investment horizon to win deals that are too big and complex for competitors.

"The reality is today there is a lot of capital, and assets are fairly priced, and so we're being patient," Wiseman told Reuters following the release of the fund manager's fiscal 2013 results. "But that doesn't mean that there are not opportunities out there."

The fund struck 87 global deals - many as part of a consortium - in fiscal 2013, including 36 deals worth more than C$200 million.

The year's big deals included the purchase of a stake in motorcycle grand prix organizer Dorna, the financing of a loan to Formula One Group, the investment in Australian shopping malls and an expansion of its warehouse portfolio in Brazil with Singapore-based Global Logistic Properties.

Wiseman said he expects another interesting year in global infrastructure and private equity.

"We're looking at a number of opportunities on a global basis around infrastructure - actually, I think at present we are looking at opportunities in infrastructure on three continents," he said.

"On the private equity side ... this is going to be a period of time when private equity firms are selling assets, either by IPOs or to strategic buyers, other private equity firms. But again, we do believe we'll find selective opportunities in this market."

It was the seventh year of the fund manager's shift to an active investment strategy. It is seeking to boost returns on its massive portfolio by buying real estate, infrastructure and other assets around the world, while providing both private equity and credit to partners looking for cash.

Wiseman stressed the fund's long-term investment horizon, saying its stability and "patient capital" makes it an attractive partner in a world dominated by short-term thinking.

"For us, a 'quarter' is 25 years, not 90 days," Wiseman told reporters.

Efforts to diversify the portfolio have boosted foreign assets to 63.3 percent of the portfolio, while Canadian assets make up 36.7 percent of the book.

The 10.1 percent 2013 investment gain was up from 6.6 percent a year earlier and its fourth straight gain after the fund manager suffered losses in 2008 and 2009. It boosted the 10-year annualized nominal rate of return to 7.4 percent.

CPPIB invests on behalf of 18 million Canadian contributors and beneficiaries, and still has about eight years before benefits paid exceed contributions and investment income will be needed to help pay pensions, in 2021.

Since 2007, CPPIB has increased staff from 154 to 906 - including 51 employees in London and 32 in Hong Kong - and ratcheted up its holdings in private market investments in a bid to outpace financial market returns offered by stocks and bonds.

Wiseman said the staff count would continue to grow and diversify in geographical expertise, but at a slower pace than in past years.

Investment returns were led by a 16.8 percent gain in private foreign developed-market equities, a 13.2 percent rise in public foreign developed-market equities, a 9.2 percent gain in real estate, and an 8.8 percent gain in infrastructure.

Weaker parts of the portfolio included investments in Canadian public equities, which returned 4.2 percent, Canadian private equities, which returned 3.4 percent, public emerging-market equities, which returned 2.4 percent, and inflation-linked bonds, which returned 3.0 percent.

(Reporting by Andrea Hopkins; Editing by Tim Dobbyn)

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