CPPIB sees 6.8% return in fiscal 2022
The head of Canada’s largest pension plan said private deals will be hard to complete as sellers resist cutting prices with equity markets tumbling.
“It’s going to be challenging probably for people to close transactions in the near term due to valuation-expectation differences between buyers and sellers,” John Graham, chief executive officer of the Canada Pension Plan Investment Board, said in an interview Thursday. That spread is widening and there aren’t “distressed sellers in the market,” he said.
Surging inflation, tightening monetary policy and war in Europe have battered global equity markets, with the MSCI All Country World Index tumbling 17 per cent so far in 2022. Swooning stocks, particularly those in China, muted CPPIB’s returns for the fiscal year ended March 31.
The fund’s emerging-market holdings incurred losses “predominately driven by investments in China, where public equity markets were negatively impacted by unanticipated regulatory reforms and a resurgence of COVID-19 cases,” CPPIB said in a statement. It earned 6.8 per cent in fiscal 2022, pushing net assets to $539 billion (US$420.4 billion).
The pension plan expects surging inflation and mounting geopolitical risks to affect returns and said it will be a challenge to match the 10-year return of 10.8 per cent that it reported for fiscal 2022.
CPPIB, one of the world’s largest institutional investors, plans to participate in fundraising for vintage funds this year.
“It’s a good place to invest and just methodically, and almost programmatically, invest in each vintage,” Graham said.
That may come as a relief for private equity firms, which are finding it harder to raise funds because some institutional investors are over-allocated to the asset class. Onex Corp. said last week that it expects fundraising to be harder and take longer.
CPPIB’s private equity investments returned 18.6 per cent during the fiscal year, driven by improved portfolio company earnings.
The pension plan continued to go deeper into private deals, with acquisitions including cybersecurity -services provider McAfee and Chinese mattress-maker AI Dream. CPPIB also has teamed up with homebuilder Lennar Corp. to construct apartment buildings in the US.