mark wiseman | Pension360

Canada Pension CEO Has Eyes Peeled For Opportunities Amidst Volatility

Canada Pension Plan Investment Board (CPPIB) Chief Executive Mark Wiseman sat down with Reuters for an interview last Friday, and made some interesting comments on how his fund deals with market volatility.

Wiseman said his fund would likely be particularly active in the coming months as fluctuations in commodities and currency markets open up investment opportunities.

Wiseman’s comments, from Reuters:

CPPIB, which manages Canada’s public pension fund, said that while investment deals have been slower in recent months because assets are fully valued, recent sharp movements in commodity and currency markets should help it find acquisitions.

“We are seeing more volatility in markets and that should generate more opportunities for CPPIB,” Chief Executive Mark Wiseman said in an interview.

“If you look at increased volatility, not just in equity markets but in currency markets, in commodity markets, the long-term view and those comparative advantages that we have, in these types of market conditions … our comparative advantages are more valuable,” he said, pointing to CPPIB’s scale, long investment horizon and certainty of assets.

[…]

Wiseman said that while CPPIB did not see deflation as a particularly large risk to the global economy, the world appeared to be moving to a two-speed model, with China and the United States showing growth and Europe and Japan needing “substantial long-term structural reforms” to improve.

“Let’s talk about Europe. It’s a very difficult situation. The economy has continued to underperform since the global financial crisis, and in terms of structural reforms, they have been reasonably slow in coming, for a myriad of reasons,” Wiseman said.

The CPPIB manages $191.3 billion in pension assets.

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Chart: The Highest Paid Pension CEOs

Over the weekend, the Financial Times released a list of the 14 highest-paid pension CEOs in the world.

Jim Leech of the Ontario Teachers’ Pension Plan, who earned over $7 million in 2013, tops the list.

The rest of the list can be seen above, along with fiscal year 2013’s investment returns.

The accompanying Financial Times story can be read here.

CPPIB Can Invest Like “An 18-Year-Old”, Says CEO As Fund Looks to Cut Bond Allocation

Canada Pension Plan Investment Board (CPPIB) CEO Mark Wiseman told Bloomberg this week that his fund can invest like “an 18-year old” as he looks to cut the fund’s bond allocation and move more money into riskier assets.

CPPIB allocates 28 percent of assets to fixed income. That’s down from 95 percent 15 years ago.

Why Canada Pension CEO Is Bullish on Energy Assets

Canada Pension Plan Investment Board (CPPIB) CEO Mark Wiseman spoke to a crowd at the World Economic Forum last week about why he is bullish on energy even as oil prices have plunged.

His remarks, according to Bloomberg:

“Part one, the world is consuming about 90 million barrels a day,” said Wiseman, chief executive officer of the Canada Pension Plan Investment Board. “Part two, God isn’t making any more.”

Wiseman said that simple supply and demand perspective all but guarantees oil prices will be higher 10 years down the road, offering investment opportunities now for the C$234 billion ($188 billion) fund.

“I’ll take that bet” on oil’s rebound, he said in an interview Tuesday at Bloomberg’s Toronto office.

Oil slid almost 50 percent last year as U.S. shale production surged while the Organization of Petroleum Exporting Countries resisted calls to cut supply. That’s had a dramatic impact on the value of oil companies around the world as prices fell to a five-year low at about $45 a barrel.

This has Toronto-based Canada Pension looking at a range of investments — from buying equity and partnering on acquisitions to outright takeovers, Wiseman said.

“We see a lot of value in the Western Canadian basin,” he said, noting that oil sands projects are on his radar.

The CPPIB manages $188 billion in assets.

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Canada Pension Chief Talks Profitable Alibaba Investment

The chief executive of the Canada Pension Plan Investment Board (CPPIB) talked with the Financial Post this week 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.

But CPPIB CEO Mark Wiseman says the investment was no “quick win”.

He told the Financial Post:

The US$314.5-million investment, while very profitable, happened because of a decision more than five years earlier to put “feet on the ground in Asia” by opening an office in Hong Kong in 2008, he said Monday.

“Our team in Hong Kong was able to educate our investment committee and others back here in Toronto, so that when the [initial] investment opportunity finally came to fruition in 2011, we were in a position to understand the business,” Mr. Wiseman said in an interview.

“They understood the Chinese market and the Chinese consumer. They had real experience in the region and understood both the similarities and, importantly, the differences between the way that retailing and trade are done in China [and how it’s done in North America].”

CPPIB subsequently increased its stake in Alibaba in 2012 and again through the IPO, and the combined stake is now worth “substantially more” than the cost base.

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

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CPPIB CEO Urges Canada to Look Overseas for Growth

The CEO of the Canada Pension Plan Investment Board (CPPIB) told the Toronto Region Board of Trade on Monday that Canada should be looking overseas and around the world for growth opportunities.

More on Mark Wiseman’s remarks from the Times Colonist:

Meanwhile, Wiseman said in a speech prepared for Monday’s annual dinner of the Toronto Region Board of Trade that Canadian organizations should be looking overseas for growth.

He noted that the CPPIB already invests 70 per cent of its capital outside of Canada, with a particular focus on China, India and Brazil.

“Most of you are familiar with Wayne Gretzky’s style of playing hockey — he staked to where the puck was going to be, not to where it was,” Wiseman said in his speech to the business audience.

“To put it bluntly, Canada needs to follow Gretzky’s practice.”

Wiseman says Canada should leverage its strong reputation overseas and its large population of immigrants, who possess a wealth of global experience that can help Canadian companies expand abroad.

“Having international skills and knowledge is a key asset — and it’s one that won’t rise and fall in value along with global commodity prices,” Wiseman said.

The CPPIB managed $201.1 billion in assets at the end of last fiscal year.

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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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Group Calls For Transparency In Canadian Pensions As Investment Expenses Rise

The Canada Pension Plan Investment Board (CPPIB) has been an active investor in private equity, real estate and infrastructure around the world. Pension360 has covered Board’s endeavors into infrastructure and real estate in India and warehouses in California.

But those kinds of investments carry fees and expenses, and one Canadian think tank is calling on the CPPIB to make those expenses clearer. From CBC News:

The report, by former Statistics Canada chief economic analyst Philip Cross and Fraser Institute fellow Joel Emes, says the Canada Pension Plan Investment Board should more clearly explain the added costs of its new approach to investing.

Beginning in 2006, the CPPIB broadened its holdings beyond traditional stocks and bonds to invest in areas such as international real estate and infrastructure projects.

That new approach resulted in an additional $782 million for external management fees and $177 million on transaction fees, the authors say.

The CPPIB, which manages the funds not needed in the near term to pay Canada Pension Plan benefits, has moved away from traditional holdings because of low interest rates that keep bond returns low, according to CEO Mark Wiseman. In the past year, it has also invested selectively in stocks because of their high valuations.

Wiseman says the “active investment” approach is needed to create value “over an exceedingly long investment horizon” and to diversify the CPPIB portfolio.

The CPPIB has invested in infrastructure projects in countries such as Brazil and India and real estate portfolios in the U.S. and Australia.

The strategy led to returns of around 16 percent in 2013. But investment expenses have spiked as a result of the active management. From CBC:

The Fraser Institute argues the CPP has faced a big hike in the cost of its investments as a result of its new strategy — from $600 million or 0.54% of assets in 2006 to $2 billion or 1.15 per cent of its assets in 2013.

That figure includes the cost of collecting the CPP from Canadian paycheques and sending benefits to pensioners.

It is being less than transparent in failing to report its external management fees and transaction costs as part of CPPIB accounts, the report says. Instead those costs appear in federal government public accounts and overall accounts for CPP.

“The CPPIB needs to be more transparent about the expense of designing and implementing its investment strategy; every dollar spent on behalf of the CPP is one less dollar available to beneficiaries,” the Fraser Institute says.

External management fees might include investment banking fees, consulting fees, legal and tax advice and taxes on transfer of real estate, which would apply to the new style of investing, but might not be as high in stock and bond investing.

The Fraser Institute, the think tank that produced the report, advocates for smaller government and greater personal responsibility.

Canada Pension Plan’s Quarterly Returns Come Up Short; New $500 Million Investment On Horizon

The numbers are in for the Canada Pension Plan’s investment performance over the first quarter of fiscal year 2015, and the country’s largest pension fund probably isn’t thrilled with the results.

The CPP returned 1.6 percent over the three month period ended June 30. Far from disastrous, the performance still falls short of its peers: the median return of Canadian pension funds over the same period was 3 percent.

In a statement, Canada Pension Chief Executive Mark Wiseman said: “All of our programs reported positive investment returns during the quarter and we continued to further diversify the portfolio globally across various asset classes.”

To that end, the Canada Pension Plan’s Investment Board also announced today that it will be allocating an additional $500 million to investments in the U.S. industrial sector.

Specifically, the investments are in warehouse facilities in high-demand areas of California that will subsequently be leased out. From a CPP press release:

The six logistics and warehouse developments GNAP has committed to are:

GLC Oakland – 375,000-square-foot Class-A warehouse distribution facility recently completed in Oakland, California, adjacent to the Oakland International Airport.

GLC Rancho Cucamonga – two warehouse distribution facilities totaling up to 1.6 million square feet in Rancho Cucamonga, California, 40 miles west of Los Angeles, in the Inland Empire West submarket.

Commerce Center Eastvale – three logistics warehouses providing in excess of 2.5 million square feet located in Eastvale, California, 50 miles west of Los Angeles, in the Inland Empire West submarket.

GLC Fontana – 640,000-square-foot warehouse distribution facility located in Fontana, California, 50 miles west of Los Angeles, in the Inland Empire West submarket.

GLC Compton – 100,000-square-foot distribution facility in Compton, California, a prime infill location within the South Bay submarket of Los Angeles.

GLC Santa Fe Springs – three warehouse distribution facilities totalling up to 1.2 million square feet located in Santa Fe Springs, California, a prime infill location within the Mid-Counties submarket in Los Angeles.

The CPP already had allocated $400 million to the Goodman North American Partnership (GNAP), a joint venture formed between the CPP Investment Board and Goodman Group.

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