PENSION BOARD TAPPING INTO ASIA

PSP Investments eyes Hong Kong, Singapore base

• Canada’s Public Sector Pension Investment Board is establishing a base in Asia to pursue deals in private debt and equity, real estate and infrastructure, mirroring a strategy already deployed in London.

The office, to be located in either Hong Kong or Singapore, will complement a London hub that is to be expanded by as much as 50 per cent in spite of the looming prospect of Brexit, André Bourbonnais, chief executive of PSP Investments, said in an interview in Toronto.

“We’re looking very actively to have a presence either in Hong Kong or Singapore,” he said, adding that both the Asia base and the expansion of the London office to as many as 45 people will be in place by the end of the current fiscal year in March.

“London is and will remain a key financial market,” Bourbonnais said, noting that British politicians have recently soothed Brexit fears with reassurances that bankers and dealmakers from other parts of the European Union will be allowed to stay if and when Britain exits the EU.

While some banks have pulled staff, it’s mostly been back and middle office employees, Bourbonnais said.

“People that are clientfacing will remain there,” he said, adding that London continues to be a draw for top deal- making and financial talent.

“The talent pool that’s available is so much larger than ( those willing to locate in) Canada, let alone Montreal,” Bourbonnais said.

In a wide-ranging interview, he said the geographic expansion at PSP Investments will be complemented by a continued focus on breaking down barriers within the pension management firm to find investments that benefit the portfolio as a whole.

Those aims were at the top of his list in March of 2015 when he took the top job at PSP, which invests funds for the pension funds of Canada’ s public service, the Canadian Armed forces and reserves, and t he Royal Canadian Mounted Police.

Another priority was to establish private debt as a new asset class at the pension investment manager, which had $ 135.6 billion in assets under management on March 31, the end of its most recent reporting period.

“In this environment, it’s a very good asset class, as evidenced by the $ 4 billion or so that we’ve been able to deploy,” Bourbonnais said, adding that the new business also led PSP Investments to establish an office in New York.

Prior to taking his current job, Bourbonnais was global head of private investments at the much larger Canada Pension Plan Investment Board, a job he says influenced his vision for the public sector pension manager he now runs.

The CPP Fund has more than $ 300 billion in assets, and deals are sourced from CPPIB’s seven international business hubs in locations including London, New York, and Hong Kong.

In addition to the geographic coverage, Bourbonnais says he was also influenced by his former employer’ s focus on the total portfolio, a strategy he introduced at PSP Investments.

“The place had been built in a very entrepreneurial fashion where… nobody was really looking at the total fund,” he said. “One of the big objectives I had was to break those silos and force people to work together at the beginning, but now it’s becoming much more spontaneous and natural for them to do it.”

He said the more co-operative strategy was evident in a deal struck in March to acquire Vantage Data Centres with partners Digital Bridge Holdings LLC and TIAA Investments.

“We couldn’t quite figure out if it was private equity, if it was infrastructure, if i t was real estate, so we stopped the debate, we put all three groups together, and we did that transaction with our partners,” Bourbonnais said, adding that other prospective transactions now in the pipeline would combine dealmakers f r om pri v at e debt a nd equity, and real estate and infrastructure.

“We’ve created a struct ure where a group of people including myself are looking at … ( transactions) that don’t quite fit nicely in one asset class but are beneficial to the total fund,” he said.

“We really foster collaboration between asset classes and (are) really making sure people work together and are rewarded for it.”

PSP’s one- year total portfolio net return of 12.8 per cent generated $ 15.2 billion of income in fiscal 2017, net of all investment costs. Gross portfolio return stood at 13.2 per cent, compared to a one per cent return in fiscal 2016.

WE PUT ALL THREE GROUPS TOGETHER, AND DID THAT TRANSACTION WITH OUR PARTNERS.