October 15, 2014 / 11:10 AM / 3 years ago

Exclusive: Canada's Caisse set to unveil big Mexico infrastructure fund- sources

The Caisse de depot et placement du Quebec (CDP) building is seen in Montreal, February 26, 2014. REUTERS/Christinne Muschi

MONTREAL/MEXICO CITY (Reuters) - Canada’s second-largest pension fund, Caisse de depot et placement du Québec, is set to make a big foray into Mexico following an initial $100 million investment in real estate, according to two sources familiar with the matter.

The sources, who requested not to be named as the deal is not yet public, said the Quebec fund is poised to soon unveil a large infrastructure-related investment in the Latin American country.

One source said Caisse and a Mexican institutional investor plan to create a joint fund to invest up to several billion dollars in domestic infrastructure projects. A deal is likely to be finalized soon, the source said.

A Caisse spokesman declined to comment on the matter.

The planned infrastructure fund comes on the heels of a Mexico City investment last week by the Caisse’s real estate arm Ivanhoé Cambridge.

The deals underscore the growing global ambitions of the Caisse, which had C$294.5 billion ($260.7 billion) in assets under management as of Dec. 31, 2013, and manages pension and insurance funds in the Canadian province of Québec.

It also comes as large projects promised by Mexico President Enrique Pena Nieto, who has spent his first two years in office passing numerous economic reforms, move closer to getting under way.

These projects include high-speed passenger rail from Mexico City to Queretaro, a new $9 billion airport in the capital and a $10 billion national broadband network. An impending spin-off of thousands of telecom towers owned by Carlos Slim’s America Movil (AMXL.MX) could also present an investment opportunity.

Caisse Chief Executive Michael Sabia is very familiar with the telecom sector, having run BCE (BCE.TO), Canada’s largest telecom company for six years before moving on to head the pension fund manager in 2009, after the global financial crisis.

The fund lost C$39.8 billion in 2008, due in part to risky real estate bets, and saw its net asset base drop to about C$120 billion. It has since been on a surer footing, with net assets recovering to nearly C$215 billion as of June 30.

In June, Sabia said the Caisse, which has long focused on investments in companies and projects within Québec, would increasingly be looking for opportunities abroad.

The fund planned to expand its investing teams and work with new partners, he said, adding it would open an office in Mexico and Singapore, as part of a plan to boost investments in Latin America and Asia.

“It is our responsibility to go out and seek returns where they are,” said Sabia. “This will be one of the cornerstones of everything we do over the next five years.”

The overseas bets would mirror those of its larger rival, the Canada Pension Plan Investment Board (CPPIB), which has been actively investing funds in infrastructure, real estate and logistics assets overseas in the last few years.

Caisse, CPPIB and rival pension funds and sovereign wealth funds, are all scouting for long-life revenue generating assets. The firms have been making significant bets in physical assets like farmland and forests, along with investments in ports, real estate, hydro-electric power projects and other such assets.

Ivanhoé Cambridge, Caisse’s real estate arm, announced last week that it plans to make its first direct investment in Mexico, with an initial investment of more than $100 million in a project in Mexico City. Ivanhoé Cambridge, which has some $40 billion in assets, will spend up to $500 million on its Mexican venture.

Writing and additional reporting by Euan Rocha in Toronto; Editing by Amran Abocar and Gunna Dickson

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