August 11, 2011 / 6:08 PM / 7 years ago

UPDATE 2-Canada fund sees buying opportunity in turbulence

* Aggressive stance reflects confidence in global economy

* CEO says financial system in better shape than in 2008

* CPPIB added C$5 bln to net assets in quarter

* Private equity, real estate contribute to increase

* Paris property market viewed as attractive investment

By Pav Jordan

TORONTO, Aug 11 (Reuters) - Canada Pension Plan Investment Board, one of the world’s top private equity players, is looking to buy assets again, taking advantage of renewed market turbulence after stepping back three months ago.

The aggressive stance by the investment arm of the nation’s public pension fund reflects confidence that the global economy will eventually start growing again, its chief executive said on Thursday after CPPIB’s quarterly results.

David Denison said world financial systems are fundamentally better prepared to handle economic shocks than they were during the 2008 crisis.

“While there are heightened risks to the global economy, we do think that there will be sustainable growth, even if it won’t be in a nice straight line or as robust as what we’d expected,” Denison said in an interview.

“The financial system is in much, much better shape than it was in 2008, although there are risks. We think conditions are fundamentally different.”

Deep-pocketed Canadian pension fund administrators became buyers of some of the world’s largest private-equity assets with the onset of the last global economic crisis.

With investment time horizons stretching out for decades in some cases, CPPIB and others bought assets in distress in areas ranging from infrastructure to shopping malls to telecoms.


Such risk-taking in part contributed to a solid increase in the Canada Pension Plan’s net assets in the fiscal first quarter ended June 30.

Assets rose to C$153.2 billion ($154.7 billion) from C$129.7 billion a year earlier, boosted by investment income from infrastructure, real estate and private equity holdings.

Assets were up 5.5 percent in the quarter from the end of March, even as equity markets retreated.

“While major equity indices were down this quarter, the fund’s private equity holdings and real estate portfolio helped deliver positive results overall,” Denison said.

CPPIB has participated in many of the largest private equity deals of recent years.

Together with partner Silver Lake, CPPIB in May said it was selling a stake in Internet phone service Skype to Microsoft Corp (MSFT.O) for $8.5 billion. The group made the investment in September 2009 for $1.9 billion.

At the time, CPPIB said it expected to become a less active buyer because loosened credit and other sources of liquidity were driving up competition — and prices — for good assets.

“Well, certainly those frothy conditions are a distant memory, and now we are prepared to transact,” said Denison.

In France, where banks have come under scrutiny for their heavy exposure to euro-zone debt, CPPIB will have its eye on the Paris real estate market.

“It’s very hard to buy there, so if somebody wanted to sell one of those office buildings in Paris, we’d be interested,” said Denison.

CPPIB expects net assets to rise to C$465 billion by 2030 and to more than C$1 trillion by 2050, far outstripping commitments to 17 million contributors and beneficiaries.

As of June 30, equities represented 51.8 percent of its investment portfolio, with C$55.3 billion (36.1 percent) in public equities and C$24.1 billion (15.7 percent) in private equities.

Fixed income, including bonds, money market securities and other debt and debt financing liabilities represented 31.1 percent of the portfolio, or C$47.7 billion.

Inflation-sensitive assets made up C$26.2 billion of its total assets, including real estate, infrastructure assets and inflation-linked bonds.

$1=$0.99 Canadian Reporting by Pav Jordan; editing by Frank McGurty

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