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(Reuters) - The Canada Pension Plan Investment Board, one of the world's biggest pension funds, notched small up gains in the first quarter as financial markets sagged, and said it is looking to China and Europe as well as oversold assets for investment opportunities.
"We are spending time looking at infrastructure opportunities in Europe. We are spending time looking at certain public markets that have been overly beaten-up relative to what we think fair value is," CPPIB chief executive Mark Wiseman said in an interview on Friday.
"(We are) spending more time in those markets and regions that are developing and growing relatively more quickly. A great example of that is China... China will be the largest economy in the world."
CPPIB, which manages Canada's national pension fund, said its assets rose to a record C$165.8 billion ($167.2 billion) from C$161.6 billion three months earlier, as its investment portfolio returned 0.5 percent for the quarter ended June 30.
Its massive size and long investment horizon has enabled CPPIB to do deals around the world, especially as cash-strapped governments and companies seek partners with deep pockets as the global economy wobbles.
CPPIB shifted to an active investment strategy just over six years ago, seeking to boost returns on its portfolio by buying real estate, infrastructure and other assets, while providing private equity and credit to partners looking for cash.
Wiseman said he wants to continue to diversify the fund's holdings and investments by geography and asset class, adding breadth to a portfolio that has so far been heavy on real estate and infrastructure.
"Generally we are continuing to look for investments in private asset classes which are more difficult to put on the books. We have about a third of the portfolio today in private asset classes -- things like real estate and infrastructure, private equity and private debt," Wiseman said.
"Those transactions you can't just go out and push a button ... and purchase them. It takes time and relationships and effort in order to effect those transactions, so it is an area we are continuing to look at."
Wiseman said the CPPIB's investment returns in a tough first quarter reflect resilience against poor stock markets and global economic headwinds.
The C$4.2 billion increase in net assets included C$0.8 billion in investment income, C$3.5 billion in net CPP contributions and C$0.1 billion in operating expenses.
Wiseman said the fund, which ranks in the top 10 of global pension funds by assets, is alert to the kind of deals that emerge in tough market conditions.
"We continue to assess opportunities today with a long horizon view, especially where we can realize value by leveraging our unique set of comparative advantages," Wiseman said. "We are patient and will act, or not, on investment opportunities according to our ability to create value in the long run."
The fund's five-year annualized rate of return was 2.1 percent at the end of the quarter, while the 10-year rate of return was 6.3 percent.
CPPIB on Thursday announced its first direct investment in U.S. industrial real estate, launching a new logistics and industrial venture with Australian industrial property manager Goodman Group.
The venture will make targeted investments in U.S. logistics hubs on the east coast and the west coast.
The two firms said the venture will have a total equity investment of $890 million, with Goodman investing 55 percent, or $490 million, and CPPIB investing the remaining $400 million.
In December, Goodman and CPPIB expanded their joint venture in China, formed in 2009, to own and develop logistics assets in mainland China.
CPPIB invests on behalf of 18 million Canadian contributors and beneficiaries. It still has about nine years before benefits paid exceed contributions and it will need investment to help pay pensions.
($1 = 0.99 Canadian dollars)
Reporting By Andrea Hopkins; editing by Janet Guttsman