Top Canadian pension fund CPPIB to increase India public equity exposure

Canada’s largest pension fund CPPIB ( Canada Pension Plan Investment Board) which has net assets of nearly $500 bn is betting big on the Indian public equity markets even as its new head honcho seeks to adopt sustainable investing. The firm had recently joined a consortium of homegrown private equity firm Multiples Alternate Asset Management and ace investor Rakesh Jhunjhunwala to acquire the animal health business of Cadila Healthcare for Rs 2,921 crores.

In its fiscal 2021 annual report released earlier this week, CPPIB said, “Building on the progress made in fiscal 2021, AE will focus its efforts to increase exposure in emerging markets by expanding our presence and investment capabilities in India.” The AE or Active Equities department of CPPIB primarily invests in common equity of publicly traded companies across sectors, geographies and sizes.

In the past CPPIB has been selective in its approach and has participated in equity capital market deals like the SBI Life Insurance IPO, the Power Grid Invit IPO and the Embassy Office Parks QIP. According to the annual report, CPPIB reported a record 20.4% rate of return nearing the half-trillion-dollar mark ( in terms of assets) seven years ahead of projections at inception.

Two Indian deals found mention in CPPIB’s list of notable transactions for fiscal 2021. First, a US $300 million investment to acquire an approximate 25 per cent stake in IT services player Virtusa Corporation (Virtusa), alongside Baring Private Equity Asia. The second was a C$128 mn investment in the National Stock Exchange.

In April 2021, realty firm RMZ Corp announced that it had tied up with CPPIB to develop office complexes in Chennai and Hyderabad and that the latter would invest Rs 1,500 crore (USD 210 million) in the joint venture. According to reports, CPPIB was also in the race for renewable energy player SB Energy, a JV between Softbank and the Bharti Group. Eventually, Adani Group acquired the firm for an enterprise value of $3.5 bn, striking India’s biggest clean energy deal.

INVESTMENT STRATEGY OF THE NEW TOP BOSS AT CPPIB

John Graham, the new President & CEO of CPPIB, who took over in February 2021, highlighted the firm’s bullishness on emerging economies. “We still project emerging markets will account for a higher share of total global economic activity over the coming decade, with the share of world GDP accounted for by emerging economies expected to surpass 50% during this time,” he said in the annual report.

Batting for the ESG ( Environmental, Social and Governance ) investing model, Graham added, “ We believe that the most rewarding investment opportunities in the global economy over the coming decades will be found among businesses that truly understand the risks, opportunities and impacts of climate change.”

Graham picked telemedicine, virtual education and logistics fulfilment centres as sectors which experienced increased adoption in the Covid-19 era. “COVID-19 led to rapid acceleration in select sectors, bringing many of our long-term investment theses to fruition earlier than expected, to the benefit of the Fund.”