By Angela Marion Lee
TORONTO — The Canada Pension Plan Investment Board, which started moving into a more dynamic investment phase last year, is increasing the proportion of its portfolio invested in real return assets.
Officials announced Oct. 25 that the C$103 billion (US$91 billion) board will become more of an activist, investing up to C$5 billion in companies considered undervalued and deemed to have turnaround potential. (All remaining asset figures are in Canadian dollars.)
This move marks the first time since its inception in 1999 that the board, created to diversify Canada's pension system away from a government-only bond strategy, will take such a pivotal position. In what CPP Investment Board officials call a "proactive engagement," the pension fund will purchase a 10% interest in a typically undervalued business and then team up with that company's directors to devise ways of bolstering performance.
"It's part of the continuing evolution of the fund," said spokesman John Cappelletti. "We have been moving since about 2004 to add active investing as part of our diversified approach, and this is just another step on that continuing journey."
He said the board will execute its new hands-on approach over the next several years.
"There's no fixed amount; it's up to $5 billion," said Mr. Cappelletti. "It's an opportunistic strategy. As board officials see investment opportunities, they will pursue them. It's not as if they have to invest a fixed amount. That dollar amount is simply to give people a sense of scope."
If successful, the first phase of the board's "relationship investing" which will initially be limited to North American interests, may be expanded to the international marketplace.
The relationship portfolio will comprise up to six companies and be considered part of the equity portfolio, overseen by Donald Raymond, senior vice-president for public investments.
As of Sept. 30, the Canada Pension Plan's asset mix was 63.7% equities, or $65.9 billion, of which $60.3 billion was in public equities; 24.9% bonds; 9.7% inflation-sensitive assets; and 1.7% in cash and cash equivalents.
