MONTREAL (Reuters) - The top real estate executive of Canada’s second-largest pension fund said he won’t have to make riskier investments to achieve his target of a 7 percent to 8 percent average annual return for the next decade.
Daniel Fournier, chief executive of Ivanhoe Cambridge, the real estate arm of Caisse de depot et placement du Quebec [CDPDA.UL], said on Monday he won’t have to take bigger risks as yields weaken, a strategy he saw many investors take before the global financial crash.
“I don’t think the answer is to go way up the risk curve,” he told reporters in Montreal.
Ivanhoe Cambridge, which owns C$48 billion ($36.22 billion) in assets, generated an average 13 percent return a year over the last five years, a target that is no longer “sustainable” as markets cool, Fournier said.
He said Ivanhoe Cambridge would continue to use the same strategy of striking a balance between higher yielding, opportunistic transactions and the purchase of quality properties that deliver stable but comparatively lower returns.
“It’s the balance between the two that gave us the 13 percent over the last five years and where we’re trying to produce the 7 or 8 percent that the Caisse is expecting from us,” he said.
In January 2015, Ivanhoe Cambridge generated headlines for buying 3 Bryant Park in New York for $2.2 billion, a near-record price for an individual U.S. office building.
While commercial real estate prices have soared in global gateway cities like New York and London, Fournier said that unlike 2007 and 2008, he doesn’t see any froth, or trend of overbuilding in U.S. markets that was prevalent in the run-up to the global crash.
Reporting by Allison Lampert; Editing by Phil Berlowitz