February 13, 2015 / 10:49 PM / 4 years ago

Canada pension fund manager sees opportunity in volatility

TORONTO (Reuters) - The Canada Pension Plan Investment Board (CPPIB), one of the world’s biggest dealmakers, expects to find more acquisition opportunities in the months ahead as global market volatility plays to its advantage, its chief executive said on Friday.

CPPIB, which manages Canada’s public pension fund, said that while investment deals have been slower in recent months because assets are fully valued, recent sharp movements in commodity and currency markets should help it find acquisitions.

“We are seeing more volatility in markets and that should generate more opportunities for CPPIB,” Chief Executive Mark Wiseman said in an interview.

“If you look at increased volatility, not just in equity markets but in currency markets, in commodity markets, the long-term view and those comparative advantages that we have, in these types of market conditions ... our comparative advantages are more valuable,” he said, pointing to CPPIB’s scale, long investment horizon and certainty of assets.

CPPIB is the world’s fourth largest pension fund and 12th largest fund, according to consultancy Towers Watson. It made 103 deals in fiscal 2014 and has private holdings in 33 countries.

It reported gross investment returns of 3.3 percent for its fiscal third quarter on Friday, as strength in global equity markets boosted returns. CPPIB ended the quarter with net assets of C$238.8 billion ($191.3 billion), versus C$234.4 billion at the end of the second quarter.

Wiseman said that while CPPIB did not see deflation as a particularly large risk to the global economy, the world appeared to be moving to a two-speed model, with China and the United States showing growth and Europe and Japan needing “substantial long-term structural reforms” to improve.

“Let’s talk about Europe. It’s a very difficult situation. The economy has continued to underperform since the global financial crisis, and in terms of structural reforms, they have been reasonably slow in coming, for a myriad of reasons,” Wiseman said.

On the other hand, he said CPPIB was bullish on Canadian economic growth despite lower oil prices, noting the country would benefit from U.S. economic strength and a lower Canadian dollar. Still, the adjustments in the economy from resource-based strength to more manufacturing and export-oriented provinces may be painful, Wiseman said.

($1 = 1.2482 Canadian dollars)

Reporting by Andrea Hopkins; Editing by Jeffrey Benkoe and Tom Brown

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