The Canada Pension Plan Investment Board (CPPIB), already a major global investor, has signaled even greater ambitions with a US$12 billion transaction with GE Capital that insiders and advisors said may herald larger deals.
The $264 billion pension fund manager’s decision not to seek a partner for the purchase of GE’s private equity lending portfolio also highlights its growing confidence and suggests it may go it alone more often on future buys.
“This deal reflects on their capabilities and the depth and breadth of the people that work there,” said an industry source familiar with the GE deal. “With the amount of money CPPIB have to deploy in the coming decades, almost by definition they have to become more global and look at larger transactions.”
The fund already owns positions in Brazilian shopping mall developer Aliansce Shopping Centers; luxury retailer Neiman Marcus and Chinese e-commerce giant Alibaba. With its funds projected to quadruple to more than $1 trillion by 2045 and an investment horizon that runs decades, the pension fund has now become one of the go-to buyers on just about any big global infrastructure or real estate sale process.
Another source familiar with CPPIB’s internal strategy said the organization has done a lot of thinking recently about how its money ought to be deployed, and concluded that it needs to take on more risk.
“The feeling is that even the present portfolio risk is too conservative for where the fund is in its life cycle,” said the person, noting that CPPIB is projected to have more fund inflows than pension payouts for a number of years to come allowing it to seek higher risk and higher reward investments at this time. “The GE deal in a sense is part of a larger move to take on more risk, but very prudently.”
The pension fund manager is looking for investments that it can scale and use to put its vast pool of capital to work, said Donald Raymond, who was CPPIB’s chief investment strategist and spent nearly 15 years there before joining Alignvest Investment Management a year ago.
“This is a platform investment. It is not just the portfolio of loans they are buying, they are acquiring a management team that can originate high quality loans for a long time, so they don’t have to build out an internal team,” he said.
CPPIB already has over 70 percent of its funds invested in assets outside Canada. Mark Wiseman, who heads the fund, has stressed that a world view and diversification are going to be linchpins of its long-term strategy.
Those close to CPPIB likened the latest deal to its US$1.8 billion purchase of reinsurance provider Wilton Re in 2014, which operates independently under the CPPIB umbrella.
“This platform gives us exposure and leverage within an area that we want to have exposure to in our portfolio and that would otherwise be difficult to build internally,” said Mark Jenkins, CPPIB’s global head of private investments.
By Euan Rocha
(Additional reporting by Allison Lampert; Editing by Jeffrey Hodgson and John Pickering)
(This story has been edited by Kirk Falconer, editor of peHUB Canada)
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