CPPIB CEO credits rise of financial markets, diversification for record annual gains
The upswing in market valuations has led to increased competition in finding investment deals with enough payoff, the head of Canada’s largest pension fund said in an interview with BNN Bloomberg.
“Things are really competitive. While we did 275 deals over the last year globally, we have to work harder and harder to find value,” Mark Machin, chief executive of the Canada Pension Plan Investment Board (CPPIB), said Thursday.
“There are record amounts of capital and dry powder for private assets whether in private equity, or infrastructure, or real estate around the world – and valuations in public markets are generally quite full. We have to work hard to find things that are little bit more complicated, things that take a little bit more time, to get returns that we require,” he said.
Machin added that the CPPIB’s equity exposure is its biggest risk, and will be for many years.
“We’ve had a fantastic run for five years,” Machin said. “I think we’re going to see lower, more depressed returns on financial assets over the next few years.”
At the end of March, the CPPIB managed net assets of $356.1 billion on behalf of the Canada Pension Plan, up from $316.7 billion at the end of fiscal 2017. The fund reported a net investment return of 11.6 per cent in fiscal 2018.
Machin added that one of the CPPIB’s biggest worries is the rise of populism around the world.
“[Populism] leads to policies that are less friendly to the flow of international investment and trade – particularly something we benefitted from tremendously,” Machin said.
“Trade and investment typically are closely connected. We want maximum opportunities to deploy our long-term capital around the world. So we hope markets stay open for investment. We keep a keen eye on whether regulations or policies will change to become less friendly.”