Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. DEFINED BENEFIT
October 19, 2015 01:00 AM

CPPIB seeks 'economic essence' of investments

Board moving beyond asset class labels to better manage risks

Rick Baert
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Geoffrey Rubin wants to understand how different investments affect the overall portfolio.

    The vast array of alternative investments in the C$268.8 billion ($204.3 billion) Canada Pension Plan Investment Board's portfolio makes its risk management very complex, requiring a look beyond asset class labels and into what the board's head of portfolio construction called “the economic essence” of each asset.

    “That's our challenge,” said Geoffrey Rubin, managing director and head of portfolio construction and research for the Toronto-based board. CPPIB manages the assets of the Canada Pension Plan, Ottawa. “At some level, we discard asset-class labels and look at risk from a very high level. Where that level is varies by the individual asset being considered.”

    “From our starting point, we looked at what kind of portfolio reaches our mandate” of providing pension benefits in Canada, Mr. Rubin said in an interview, “and with what collection of investment strategies. It requires us to balance our risk-return profile across our entire portfolio. It's not enough to have certain real estate, infrastructure, private equity investments, but what all of these are contributing to the overall portfolio.”

    As of June 30, CPPIB had 17.7% of its assets in private equity, 11.4% in real estate and 5.6% in infrastructure, according to the board's second quarter report. For its fiscal year, ended March 31, private emerging markets equities returned 46.8%; private developed markets equities, 30.2%; infrastructure, 16.5%; real estate, 14.1%; and Canadian private equities, 10.1%.

    Overall, the board returned 18.3% for its last fiscal year.

    Mr. Rubin spoke as the board on Oct. 8 announced two co-investment deals, a $900 million joint venture with commercial property manager Broe Group to acquire the Denver Julesburg Basin, an oil and gas field in Northeast Colorado, from Encana Oil & Gas (USA), and a partnership with APG Asset Management, which manages the assets of the e344 billion ($385.6 billion) Stichting Pensionfonds ABP, Heerlen, Netherlands, and real estate investment manager Goodman Group, for U.K. logistics and industrial investments that could reach £1 billion ($1.5 billion).

    They're the latest examples of the board's strategy to implement its real asset and infrastructure investment strategy. The use of joint ventures spreads the risk among co-investors, Mr. Rubin said, but it doesn't lessen the board's responsibility to make prudent investments. That's where he said CPPIB's governance structure, which allows the board to freely invest without government approval, comes in.

    The model is “incredibly supportive, providing a clear mandate and ability to invest in asset classes and geographies where we can take all necessary steps from portfolio planning to construction and implementation,” Mr. Rubin said. “Everything we do, including assessing risk and return, ultimately stems from that developed governance model.”

    With co-investments, “more governance issues are involved,” Mr. Rubin said. “We're huge believers in partnering with very strong firms, ones with similar investment beliefs and horizons as us, and with their own strong governance. That's particularly important in emerging markets and other investments, where the (investment) expertise we bring is supplemented by the understanding our partners have in these markets and these assets.”

    Extending strategy

    CPPIB's overall risk-return strategy will also extend to investments the board might commit to five to 10 years into the future, in asset classes or specific investments it might not yet be aware of.

    “We absolutely expect to be in new asset classes,” Mr. Rubin said, citing as recent new investments intellectual property rights and farmland. “Those are two examples of nascent asset classes. And new classes like those require us to do our level best to understand the primary drivers of performance. There's not always an accurate track record to base them on.”

    Mr. Rubin said the scale of CPPIB does give it an advantage in finding such new investments, given its research staff of 60, but the board still determines the sizing of its investment exposure the same way as smaller pension funds.

    “Scale is very important,” he said, “but you still need to pull all that information together. You can make some headway with some data, but with new investments, sizing investment exposure has to be consistent with the command and grasp of that investment. Funds of all sizes can do this.”

    CPPIB has in fact discussed its risk management strategy with global pension funds and sovereign wealth funds, but board officials have had less interaction with their public pension brethren in the U.S.

    “We'd love to show what we do to the U.S.,” Mr. Rubin said about the so-called “Canadian model.” “But it's not clear if there are conditions to really thoughtfully move into that. It's not clear if (large public U.S. plans) can do” what CPPIB does.

    The style works in Canada, Mr. Rubin said, is “because we've been given a clear mandate” by the plan sponsor “that's incredibly supportive, with a model of portfolio construction — from planning to construction to implementation — to invest in asset classes and geographies where we can get the most optimal performance.”

    Mr. Rubin said talking about the Canadian model with foreign pension funds and wealth funds outside the U.S. “is one of the most rewarding aspects” of his job. He has discussed issues with the $300 billion Government of Singapore Investment Corp.; Norges Bank Investment Management, which handles assets for the 6.9 trillion Norwegian kroner ($821 billion) Government Pension Fund Global, Oslo; the NZ$29.5 billion ($19 billion) New Zealand Superannuation Fund, Auckland, and similar funds in Australia.

    “We discuss our singular problems and issues, and look at the difference circumstances we face, but ultimately we share the same approaches to how we run our funds,” he said. “I spend a ton of time with people at these funds, but not as much with American folks. Our contacts with them have been limited, to be honest.” n

    Related Articles
    CPP board taking a bold step in GE transaction
    Long-term view embraced anew
    New prime minister expected to pursue boosting Canada Pension Plan
    NZ Super reports 5.3% decline in latest quarter
    10 largest Canadian public pension funds' assets top $1 trillion — report
    CPPIB anchors $2 billion in investments benchmarked to new long-term value index
    Recommended for You
    Liability-driven investing leads to full funding
    R.I. treasurer seeks transparency laws for church plans
    R.I. treasurer seeks transparency laws for church plans
    Public pension funds adopt cost-sharing mechanisms to stem volatility
    Public pension funds adopt cost-sharing mechanisms to stem volatility
    Strong Demand Drivers Underpin Private Credit
    Sponsored Content: Strong Demand Drivers Underpin Private Credit

    Reader Poll

    July 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    July 4, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit