Canada pension funds pull back on infrastructure as prices climb

Fri Feb 5, 2016 1:00am EST
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* Canadian pension funds worried market overheating

* Funds concerned valuations overlook illiquidity

* Executives say auctions create risk of overpaying

* Private equity players gripe at Canadians' 'dumb money'

By Matt Scuffham

TORONTO, Feb 5 (Reuters) - Canada's biggest pension funds say they are walking away from more and more global infrastructure deals, citing concerns that intense competition for assets has driven valuations too far.

The shift could help cool global prices for tunnels, airports, toll roads, energy networks and other infrastructure as Canadian pension plans are among the world's biggest and most active buyers.

Pension funds' investment in infrastructure has risen since the 2008 financial crisis, as plunging interest rates and bond yields drove these players to seek steady returns elsewhere. Global equity and commodity turmoil has done little to dampen that interest and intense competition for a limited number of assets has been reflected in recent valuations.

Some investors, particularly in private equity circles, complain that the Canadian funds - dubbed "maple revolutionaries" because of the strategy of direct equity investments they pioneered in the 1990s - have a tendency to overpay.   Continued...