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CalPERS Put Its Money to Work in India in 2014

The Canada Pension Plan Investment Board, among other pension funds, has been vocal about making India part of their long-term investment strategy.

CalPERS hasn’t announced it from the top of the hills, but the numbers reveal that the country’s largest public pension fund is also taking considerable interest in India.

CalPERS increased its exposure to India by over 33 percent in 2014.

From VC Circle:

The California Public Employees’ Retirement System (CalPERS), one of the top public pension funds in the US, saw its exposure to assets linked to Indian currency rise by over a third to $1.7 billion in the fiscal ended on June 30, 2014 as compared to $1.27 billion in the year ago period, according to the annual financial report of the company.

Almost all of this was due to changes in fair value of assets in the equity securities bucket from $885 million to $1.3 billion. The value of the real assets, representing primarily real estate assets, shrunk marginally.

This data represent investment securities of all CalPERS managed funds, including derivative instruments that are subject to Indian rupee foreign currency risk.

It did not list any quantum against PE assets in India and it could not be ascertained if this is due to its forex hedging over dollar denominated offshore funds or it has actually disassociated itself with India-focused PE funds.

But CalPERS does counts itself as an investor in several global PE funds investing in India including some in their regional funds. These include Blackstone, KKR, Carlyle, TPG, Clearstone, SAIF Partners, etc.

CalPERS manages over $300 billion worth of pension assets.

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Canada Pension Takes On $198 Million Real Estate Project in Suzhou

The Canada Pension Plan Investment Board (CPPIB) has committed $198 million to a massive real estate development project in Suzhou, China.

The fund is investing in the Times Paradise Walk project, a 735,000 square meter space consisting of residential, retail, office and hotel space.

From a release:

Canada Pension Plan Investment Board (CPPIB) and Longfor Properties Company Ltd. (Longfor) announced today that they have formed a new joint venture for a major mixed-use development project in Suzhou, Jiangsu Province, China.

The new joint venture was formed on December 23, 2014 with CPPIB committing RMB 1,250 million (C$234 million) to jointly develop the Times Paradise Walk project in Suzhou, the fifth most affluent city in China with a population of 10 million. The mixed-use development is an integrated project comprising residential, office, retail and hotel space covering a total gross floor area of 735,000 square metres. It is designed to be a top quality, one-stop commercial destination in Suzhou with completion scheduled in multiple phases between 2016 and 2019.

“This is CPPIB’s first direct joint venture in a mixed-use development in China and we are pleased to be doing this alongside Longfor, a well-respected and experienced developer in China,” said Jimmy Phua, Managing Director, Head of Real Estate Investments Asia for CPPIB. “We look forward to building a long-term strategic partnership with Longfor that will allow CPPIB to continue to invest in large scale mixed-use and retail projects in China, a market in which we see long-term growth potential.”

Located in the heart of the Central Business District of the Suzhou Gaoxin District with connections to the subway lines, Times Paradise Walk Suzhou, which started construction in 2013, has already received strong responses following two separate residential launches in 2014 with total contract sales of RMB 1.9 billion.

The CPPIB manages $234.4 billion for the Canada Pension Plan.

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Canada Pensions Facing Weak 2015: Survey

A survey of investment managers conducted by Mercer reveals that Canadian pension funds could be looking at a weak 2015.

From the Globe and Mail:

Canadian pension plans are facing another weak year in 2015 with interest rates forecast to remain low and Canadian economic growth expected to trail global gross domestic product expansion.

A survey of investment managers by consulting firm Mercer shows most are expecting modest increases in interest rates this year and low investment returns, combining to create slow growth in pension plan funding in 2015.

[…]

Mercer said its Pension Health Index, which tracks the solvency position of a hypothetical pension plan with typical asset allocations, fell from a surplus position of 106 per cent at the end of 2013 to a shortfall position of 95 per cent by the end of 2014.

Mercer partner Mathieu Tanguay said most pension plans saw their funded status drop in 2014 because long-term interest rates fell, undermining investment returns for the year. Pension plans determine the size of their long-term funding liability using long-term interest rate levels, so falling interest rates mean a greater cost to fund pensions for plan members.

“Last year wasn’t too bad from an asset-return perspective only,” Mr. Tanguay said. “If you look at financial markets, a typical investor would have earned in the area of 10 to 12 per cent. So it’s not bad. But what hurt pension plans was the fact that interest rates dropped. Assets went up, but liabilities went up higher.”

The weakening was especially acute in the final quarter of 2014 as long-term interest rates fell toward 60-year lows. Long-term government of Canada bonds closed the year at 2.3 per cent, a drop from 3.2 per cent at the start of 2014.

Mercer’s Mathieu Tangua said the survey results paint a picture that pension funds are unlikely to see a funding improvement in 2015.

Energy Company Defaults on Canada Pension Debt; May Shut Doors If Deal Can’t Be Struck

Oil Sands producer Laricina Energy Ltd. has defaulted on debt issued by the Canada Pension Plan Investment Board (CPPIB), and says it may have to shut its doors if a plan can’t be worked out with the CPPIB.

From the Wall Street Journal:

Junior oil sands producer Laricina Energy Ltd. said it may no longer be able to fund its operations after defaulting on financing extended by Canada’s largest pension fund, the CPP Investment Board.

The privately-held company’s chief executive said Monday that Laricina is in talks with the fund and expressed confidence an agreement would be reached to allow the company to stay in business after it breached a debt pact covenant.

“We would have every expectation that we would come to a conclusion with CPP in our discussions,” CEO Glen Schmidt said in an interview. “CPP has been a strong supporter of the company,” he said.

A representative for the CPP Investment Board declined to comment.

On Friday, Laricina said its average production in the quarter ended last month was 18% below a target of 1,255 barrels a day, which violated the terms of 150 million Canadian dollars ($127.6 million) in debt extended earlier in the year by the CPP.

[…]

The notes issued to the CPP, which yield 11.5%, were secured against the assets of the company, which Laricina said totaled C$178 million as of Dec. 31. That is down from C$218.5 million as recently as June 30, 2014.

[…]

In addition to debt financing, the CPP said in its latest annual report that it has made C$350 million in equity investments in Laricina. Other key investors include Lime Rock Partners, Kayne Anderson Capital Advisors and Mount Kellett Capital Management, according to a Laricina presentation dated Sept. 11, 2014.

The CPPIB manages approximately $234 billion in assets.

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Pensions Eye Indian Infrastructure

In December, the Canada Pension Plan Investment Board (CPPIB) made a $157 million investment in the infrastructure arm of an Indian engineering company.

The CPPIB says investments with India are a “key part” of its long-term plans.

Other pension funds may also find the county’s infrastructure to be an attractive investment. From the Economic Times:

Indian road projects are likely to post a significant rise in merger and acquisition activity in 2015 as pension and private equity funds are eyeing these projects for handsome returns.

Increase in road traffic and a better economic climate have made the sector lucrative for investors with deep pockets, looking for long-term investment opportunities. In the last one month, two road projects have changed hands and sector players and experts anticipate more such deals in the offing.” Funds and institutional investors are interested in high yield, long-term investments and road projects offer a good opportunity.

[…]

“Revenue from roads will improve as GDP picks up, so it is an attractive investment option. The slowdown in the last two-three years has dampened the price expectation of developers, so the mismatch in valuation expectation has reduced,” said MK Sinha, managing partner and chief executive officer of IDFC Alternatives.

[…]

Infrastructure industry players said that more pension funds are in the market scouting for investment opportunities, with a clear preference for operational road projects. Pension funds primarily manage funds for people who are retiring and looking for low-risk investments with consistent returns for in the long term. Their interest in Indian infrastructure will augur well for the capital-intensive business whose long-term capital needs cannot be met my banks alone.

In 2014 the CPPIB announced plans to open an India office.

Canada Pension Invests $157 Million in Indian Engineering Firm

The Canada Pension Plan Investment Board (CPPIB) has made a $157 million in the infrastructure arm of an Indian engineering company.

The investment is the first direct investment in an Indian infrastructure firm by a Canadian pension fund. The $157 million is only the first installment in CPPIB’s commitment, which totals $314 million.

Details from VC Circle:

Canada Pension Plan Investment Board (CPPIB) has invested Rs 1,000 crore (around $157 million) in L&T Infrastructure Development Projects Ltd (L&T IDPL), a unit of Larsen and Toubro Ltd (L&T), by way of subscription to compulsorily convertible preference shares, as per a stock market disclosure.

The investment, made through CPPIB’s Singapore-based wholly owned subsidiary, is the first tranche of proposed Rs 2,000 crore (around $314 million now) investment that was approved by the Foreign Investment Promotion Board (FIPB), the nodal government body monitoring foreign investment in the country, earlier this year.

The two companies signed a definitive investment agreement in June this year.

“A second tranche of Rs 1,000 crore or such higher amount as may be agreed between L&T IDPL and CPPIB’s subsidiary, will be invested after 12 months from the date of the initial investment, subject to any required regulatory approvals at such time,” L&T said in the statement.

CPPIB manages $234.4 in assets.

Canada Pensions Look For Opportunities in Energy Slump

The Canada Pension Plan Investment Board was weighing a bid for Talisman Energy Inc. – the Board decided against it, at the company ended up being bought Tuesday morning by Repsol SA.

But the interest the Board displayed in troubled Talisman Energy is emblematic of a larger trend: Canada’s pension funds are looking for opportunity in the midst of a serious energy slump.

From Bloomberg:

The 22 percent slump in Canadian energy stocks since late November is just the kind of event that can create opportunity for investors such as pension funds, said Ron Mock, head of the Ontario Teachers’ Pension Plan.

“Sometimes that happens when everybody is heading out the door and we actually use our long-term advantage to go in,” Mock, chief executive officer of Ontario Teachers, the country’s third-biggest pension fund, said during an interview at Bloomberg’s office in Toronto last week. The energy market doesn’t appear to have quite bottomed for Teachers yet, he said.

Lower energy prices will reduce companies’ cash flows and eventually put pressure on them to weigh their capital plans for next year, Mock said. That will have some producers looking for investors, or outright takeovers, he said.

[…]

Ontario Teachers isn’t consciously counter-cyclical in its investment strategy, Mock said. The focus is on value-oriented, long-term investments, a strategy that tends to provide it with opportunities during both the ups and downs of the market, he said.

[…]

Mark Wiseman, CEO of Canada Pension, said on Nov. 13 that the plunge in oil prices might offer investment opportunities in Canada’s energy sector.

“We are seeing a period now where there may be increasing opportunity in the Western Canadian basin and Canadian energy companies as the market sort of reprices,” Wiseman said.

[…]

One of Ontario Teachers key concerns about investing in Canada’s oil patch is the potential for regulatory changes, Mock said. This doesn’t dissuade the pension fund from investing in the oil and gas sector, he said, but it does raise concerns that certain assets might become too expensive to develop, he said.

The pension fund also will consider investments based on environmental factors.

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Canada Pension Chief Talks About “One of the Best Investments We’ve Ever Made”: Investing in Alibaba in 2011

The chief executive of the Canada Pension Plan Investment Board (CPPIB) talked with the Financial Post on Thursday about the Board’s investment in Alibaba in 2011.

At the time, Alibaba was an unknown tech company in China. A few years later, the company’s initial public offering was the largest in history.

From the Financial Post:

[Wiseman] said the reason the Canadian pension fund manager was able to make a “very sizeable investment” in what was then “an obscure Internet company” in a city in China few had heard of is because executives had opened an office in Hong Kong back in 2008.

“That investment story which everybody is touting as one of the best investments we’ve ever made, it didn’t happen overnight. That investment started in many respects almost seven year ago,” Mr. Wiseman said.

“It started with a view towards that market, a view that we need to build capabilities in the region, that we need to deepen our understanding of the region, and that we had a long-term view around the Chinese consumer, the importance of the Chinese consumer.”

Mr. Wiseman said the route to the Alibaba investment, which is worth “substantially more” than the fund’s cost base thanks in part to a large investment in the successful IPO last month, illustrates the long-term strategy and the “on the ground” investing style.

“We didn’t get brilliant in four weeks, right? … We had people on the ground in Hangzhou [the city in China where Alibaba is based] before people knew where Hangzhou was,” he said.

“We were there soon after opening our office in Hong Kong, developing those relationships with people who speak the language and who understand the market… To me, this is exactly what we’re trying to do as an organization.”

After the initial investment in 2011, CPPIB increased its stake the following year and then again through the IPO, Mr. Wiseman said.

The CPPIB has a total of $314.5 invested in Alibaba.

Photo by Charles Chan via Flickr CC License

Canada Pension Teams With Hermes, Invests in Massive London Real Estate Project

The Canada Pension Plan Investment Board (CPPIB) has teamed up with Hermes Real Estate to invest in a 1.5 million square foot, partially developed London property.

The building, Wellington Place, will include offices, apartments and retail space.

Canada Pension Eyes Oil As Prices Drop

The head of the Canada Pension Plan Investment Board (CPPIB) said Thursday he sees “increasing opportunity” for investment in Canadian energy companies as oil prices continue their recent decline.

From a Bloomberg interview:

“We are seeing a period now where there may be increasing opportunity in the Western Canadian basin and Canadian energy companies as the market sort of reprices,” Mark Wiseman said in a telephone interview today.

Brent crude extended losses below $80 a barrel, dropping to a four-year low on speculation Saudi Arabia will not reduce output amid a glut of supply.

Wiseman said the resulting decline in oil prices will put pressure on some of the less financially sound energy companies, potentially creating some opportunities for acquisitions.

“Our attraction will be to those best-quality assets, best-quality management teams, and best-quality companies,” he said.

Wiseman, chief executive officer of the fund, pointed to Canada Pension’s investment in Seven Generations Energy Ltd. (VII) as an example. The pension fund is the largest shareholder, holding more than 15 percent of its common shares, according to data compiled by Bloomberg.

Canada Pension, which was an early investor in Seven Generations, didn’t sell shares in the company’s initial public offering last month because it sees long-term opportunities in the company. Seven Generations debuted in Toronto on Oct. 30 at C$18 a share and has since climbed to $22.50 today.

“It’s a great example of the long-term view we take,” Wiseman said. “We made a very conscious decision that we want to watch that value accrete and grow over the long term.”

The CPPIB manages $206 billion in assets for the Canada Pension Plan.

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