UPDATE 1-Canada pension fund boss wishes he'd made more deals

Fri Feb 14, 2014 2:32pm EST

By Andrea Hopkins

TORONTO Feb 14 (Reuters) - The Canada Pension Plan Investment Board (CPPIB), one of the world's biggest pension funds, notched another quarter of strong returns but its chief executive officer said he wishes the fund had been more aggressive when prices were cheap.

CPPIB, which manages Canada's national pension fund and is a major global dealmaker, said it had gross investment returns of 5.9 percent for the third quarter ended Dec. 31, taking its five-year investment rate of return to an annualized 7.2 percent.

The fund's deep pockets and long investment horizon helped it complete deals that rivals could not make when times were tough. But the global economic recovery has meant an increase in competition and asset prices that are no longer such a good deal.

In retrospect, CEO Mark Wiseman said he wishes the fund had been even more aggressive in deal-making five years ago, given the market recovery.

"I think a lot of people thought we were overly aggressive, but hindsight is 20/20. Should we have bought more assets? We probably should have, because almost everything we did in that period has worked out incredibly well," Wiseman said in an interview.

The payoff for making big successful bets in the wake of the financial crisis pushed CPPIB's net assets to a record C$201.5 billion ($183.57 billion) in the third quarter, compared with C$192.8 billion at the end of the previous quarter.

CPPIB began really diversifying beyond traditional financial assets like stocks and bonds in 2006, and was sideswiped by the financial crisis in 2009. But big global deals in assets like real estate and infrastructure have boosted the fund's rate of return, and it has opened offices in London, New York, Hong Kong and, in April, Sao Paulo, Brazil.

The fund's asset mix was 50.2 percent equities, 33.3 percent fixed income and 16.5 percent real assets at the end of 2013, with 10.9 percent in real estate and 5.6 percent in infrastructure.

Wiseman said CPPIB will continue to look to higher-growth economies like those in Latin America for investment opportunities as competition drives up prices elsewhere, but the fund will have to pick its deals carefully.

"You're not seeing a lot of opportunity in the market because markets are strong and we seem to be in a period now where there is a fairly high degree of stability, compared to five years ago, and that means assets by and large tend to be fairly valued," Wiseman said.

"So for CPPIB that means picking our spots very, very carefully and it means continuing to build capabilities in those areas where in the long run we think that growth is going to exceed the global average."

The new Sao Paulo office, announced this month, will serve as the hub for CPPIB's investments in Brazil, Chile, Colombia, Mexico and Peru. The fund already has nearly C$5 billion in invested assets in the region.