Canada Pension Plan Investment Board (CPPIB), one of the world’s biggest infrastructure investors, is regularly losing out in bidding wars for such assets, its chief executive said, as investors seek alternatives to low-yielding government bonds.
CPPIB is one of the world’s biggest investors in infrastructure such as roads, bridges and tunnels but its CEO Mark Machin said high valuations were making it harder to do deals in the current environment.
“We are consistently outbid for assets around the world because they are really priced almost to perfection and there’s an enormous amount of capital chasing infrastructure, particularly in developed markets,” Machin told reporters after the fund reported results for its last fiscal year on Thursday.
CPPIB did acquire a 33 percent stake in Pacific National, one of the largest providers of rail freight services in Australia, for about A$1.7 billion (US$1.3 billion) last year but was generally less active in the infrastructure space than it has been in previous years.
Machin said the current imbalance between supply and demand in the global infrastructure market could change if U.S. President Donald Trump proceeds with a US$1 trillion infrastructure plan.
“If the U.S. comes on stream that would be really interesting because it’s such a massive market. There are pools of capital that are getting ready to invest in it. If policy (makers) in the U.S. got their act together that would produce a good home for a lot of capital looking for that type of opportunity,” he said.
In an interview with Reuters, Machin said he anticipated Trump’s infrastructure plan would present a “massive opportunity.”
“It could be huge,” he said. “We’ve got plenty of firepower and expertise to look at those opportunities when they arise.”
The fund, which manages Canada’s national pension fund and invests on behalf of 20 million Canadians, reported a net return of 11.8 percent on its investments last year, helped by its strategy of diversifying across asset classes and geographies.
The performance represented a significant improvement on the year before, when the fund achieved a net return of 3.4 percent.
CPPIB said it ended its fiscal year on March 31 with net assets of $316.7 billion, compared with $278.9 billion a year ago, one of the largest yearly increases in assets since it was created 20 years ago.
Machin ruled out the possibility of CPPIB providing funding to Home Capital Group, Canada’s biggest non-bank lender, which is struggling to finance its assets. “It’s not something that, as far as I’m aware, any of our teams have been looking at closely,” he said.
(Reporting by Matt Scuffham; Editing by Chizu Nomiyama and Steve Orlofsky)
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