Mark Wiseman, the chief executive of the Canada Pension Plan Investment Board, which invests on behalf of Canadian workers and retirees, says he won?t be lured into competition for hot real estate assets that could drive down returns.
?We have the luxury of not having to invest? and we can pick our spots,? Mr. Wiseman said in an interview Friday after the CPP Fund reported third-quarter financial results.
?Presently in both debt capital markets and in real estate, we?re seeing a lot of competition for assets? and we?re being very cautious.?
The situation is particularly acute in real estate, where there is limited supply of the well-situated, top-tier retail and office properties generally sought by CPPIB.
By way of example, Mr. Wiseman pointed to the record $1.27-billion paid by two real estate investment trusts in March for the downtown Toronto headquarters of the Bank of Nova Scotia.
He said he expects CPPIB?s private equity teams to be busier over the next little while, noting the appetite for leverage that was demonstrated in the recent US$24.4-billion privatization of computer maker Dell. CPPIB, which?invests the funds not needed by the Canada Pension Plan to pay current benefits,?was not involved with that deal.
In the first nine months of the fiscal year, which ends in March, the CPP Fund increased by $11-billion to $172.6 billion. This includes $9-billion in investment income before operating expenses, representing a gross investment return of 5.5%, and $2.4-billion in net CPP contributions.