Tuesday 12 March 2013

CPPIB Investment Turns to Private Deals and Infrastructure

The other day I read RetirementAction Peter Benedek's explanation of why he decided to take his CPP pension at 65 instead of his original plan of 70. One of the points he makes is that CPPIB's investments are becoming increasingly opaque and therefore riskier due to a shift to private deals, since they are hard to value. The fact of the shift is undeniable (they say it themselves at CPPIB), the question is whether risk is actually higher. Consider this brief video interview conducted last September by McKinsey with CPPIB CEO Mark Wiseman. In it he describes how CPPIB looks at private infrastructure deals like buying a toll road as buying into a quarter century of cash flows from sticking with the investment through its full life and not as an opportunistic trading asset to flip for a quick profit. In that perspective, the risk becomes whether CPPIB has done its homework so that projected cash flows actually happen and whether the governance and supervision mechanisms of the CPPIB prevent too much capital ending up in any one holding or connected groups of holdings. In contrast as well, I wonder if any mutual fund held in the average RRSP would take the same view, given the pressure to show annual performance in order to promote themselves and collect or keep assets. I dunno about others but I don't find the CPPIB's private infrastructure deals too troubling.

1 comment:


I like the sound private infrastructure deals. Theirs many cities and towns and states in the united states that are in serious financial condition. One of the few options left to them is to privatize public assets roads bridges waterways public buildings. Look for many such deals in the coming years.

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