Canada’s biggest pension plan is one of most active short-sellers in Europe
CPPIB has nearly doubled its number of positions since last year, data shows
TORONTO The Canadian Pension Plan Investment Board has at least 23 short positions in European Union markets, covering more than $750 million worth of securities, making it one of the more active short sellers in the continent, according to data compiled by a German firm that tracks short selling.
According to a report prepared for the Financial Post by Breakout Point, a Dusseldorf-based firm that specializes in accumulating short-selling data from activist short sellers, publicly available records and BETA-funds, the CPPIB has nearly doubled the number of its disclosed short positions since last year, to 23 from 14. That places CPPIB 14th on the list of the mostactive short sellers in Europe by number of significant positions, according to Breakout Point.
“They are the only pension fund in the Top 20 and one of the very few such or similar entities in all of our short-selling records,” the Breakout Point report said. “They are the ones that stand out in terms of activity.”
Breakout’s tallies are based on short positions that involve 0.5 per cent or more of a company’s total shares. In European Union markets, all short positions that meet this threshold must be publicly disclosed, part of transparency measures that have been mandatory since 2012. Canada and the U.S. have no such requirement.
The pension fund may have other short positions in Europe that do not need to be disclosed.
CPPIB would not comment on its short positions or its European investment strategy. However, the board’s 2018 annual report said that it employs both long and short positions as part of its broader market strategies that take advantage of the fund’s longterm outlook to “buy and hold when others cannot and think beyond short-term volatility.” As of March 31, the pension fund said it had sold short more than $13 billion in securities altogether, still a small fraction of the $356.3 billion in assets it manages.
Among its disclosed European short positions, seven target German companies and another five involve companies in each of the U.K. and the Netherlands. CPPIB has one short each in Norway and Sweden respectively — the two smallest markets in which it held shorts.
Their portfolio is balanced by sector, according to the report, with four short positions in construction and engineering firms and two in four other sectors.
Unlike other short sellers, CPPIB’s positions focus on smaller and mid-cap companies, the report said — the pension fund only has short positions in three companies with a market cap of more than $10 billion.
Using the current market cap of the 23 companies and the disclosed short position percentage, the Post calculated that the CPPIB’s disclosed holdings covered securities currently worth at least $750 million.
The specific companies in which CPPIB has short positions include British publishing and education company Pearson PLC. The company has a market cap of more than $12 billion and is the CPPIB’s largest short position at about $150 million, based on the Post’s calculations.
The second-largest position is in German Internet provider Wirecard AG, in which it is shorting $131 million worth of shares, or .54 per cent of the company. Colruyt SA, a Belgium-based supermarket retail chain, is the pension fund’s third-largest short.
Among CPPIB’s short holdings, only two companies — Aixtron SE, a German manufacturer of chemical vapour deposition equipment and Fugro N.V., a Dutch company that provides geoscience solutions for construction and natural resources sectors — appear in Breakout Point’s list of companies in European markets with the highest short percentages. CPPIB’s other targets aren’t so popular.
The report does not offer a conclusion on whether the CPPIB’s strategies have been successful, but they do not fit the classic shortseller pattern.
“They do not come across as an opportunistic, in-and-out type of player,” the report said. “Their shorts are often rather long-term.”
At least two disclosed stocks have plunged since the CPPIB started shorting them. The CPPIB opened a 0.5-per-cent short position in Talend SA, an American software vendor that is listed in Europe, on Oct 1. Since then, shares have fallen to 29 euros from 59 euros. A position in Dutch delivery company PostNL opened on Nov. 30, 2017 also appears to have been a winner. The stock has fallen about 35 per cent since the short position was first opened.
However, Wirecard has seen a 400-per-cent increase in share price since the CPPIB first opened a 0.57-per-cent short position on April 30, 2015, when prices stood at 38.97 euros. Since then, the pension fund has altered the size of its position more than 44 times.
Shares of Wirecard, which was also targeted by activist short sellers who have since exited their positions, skyrocketed to a 52-week high of 199.30 euros in September, and closed Thursday at 130.10 euros.