Pen­sion fund eyes big­ger China role

China Daily (Canada) - - FRONT PAGE - By LI XIANG in Beijing lix­i­ang@chi­

Canada Pen­sion Plan In­vest­ment Board will ex­pand its ex­po­sure in the Chi­nese mar­ket de­spite un­cer­tain­ties like a weaker yuan and greater mar­ket tur­bu­lence next year, a top of­fi­cial said.

CPPIB, which man­ages one of the world’s largest pen­sion funds, has to­tal as­sets of $205.7 bil­lion un­der man­age­ment as of Sept 30, re­it­er­ated its com­mit­ment to China by in­vest­ing $500 mil­lion in the Postal Sav­ings Bank of China.

Mark Machin, head of in­ter­na­tional for CPPIB, told China Daily in a re­cent in­ter­view that the fund will con­sider in­creas­ing its hold­ings in the bank if the ini­tial in­vest­ment “goes well”.

De­spite ris­ing mar­ket an­tic­i­pa­tions of a weaker yuan, Machin said the fund’s in­vest­ment strat­egy will con­tinue to be long-term and driven by China’s eco­nomic shift to­ward a consumption and ser­vice-based growth model.

“As long as the cur­rency de­pre­ci­a­tion is mod­est, we’ll not change our view of in­vest­ing in China,” he said.

The Cana­dian fund has been in­vest­ing in China since 2008 as a key mar­ket to di­ver­sify its in­vest­ment port­fo­lio and to off­set the volatile global mar­ket con­di­tions.

CPPIB has about $10 bil­lion in­vested in China and man­ages a quota of $1.2 bil­lion ap­proved by the Chi­nese reg­u­la­tors un­der the Qual­i­fied For­eign In­sti­tu­tional In­vestor pro­gram in the Chi­nese eq­ui­ties mar­ket.

The Cana­dian fund has in­vested $314.5 mil­lion in China’s e-commerce gi­ant Alibaba Group Hold­ing Ltd since 2011. Last year, it formed a joint ven­ture with China’s largest res­i­den­tial de­vel­oper Vanke Co Ltd and will in­vest $250 mil­lion in the coun­try’s real es­tate mar­ket.

Machin said the Cana­dian fund will con­tinue to grow its real es­tate in­vest­ment in China “se­lec­tively and care­fully” as some mar­kets have been over­sup­plied while seek­ing more al­lo­ca­tion in both pri­vate and pub­lic eq­ui­ties.

The fund is also plan­ning to en­ter China’s in­ter­bank bond mar­ket as the mon­e­tary au­thor­i­ties are lib­er­al­iz­ing the do­mes­tic credit mar­ket where CPPIB has al­most “zero ex­po­sure”.

The dif­fi­cult mar­ket con­di­tions this year have ham­mered in­vest­ment gains of CPPIB, which achieved a mod­est 1.5 per­cent net in­vest­ment re­turn in its sec­ond fis­cal quar­ter.

While an­tic­i­pat­ing ris­ing mar­ket volatil­i­ties due to the di­ver­gence in the mon­e­tary poli­cies of the world’s ma­jor economies, Machin said he would ex­pect lower in­vest­ment re­turns in fis­cal 2016, com­pared to 18.7 per­cent the fund achieved in the past fis­cal year.

He also warned about sub­stan­tial as­set price ad­just­ment in the United States mar­ket as in­vestors have not been fac­tor­ing in “enough risks” in the in­ter­est rate hike by the Fed­eral Re­serve.

Black­Rock Inc, the world’s largest as­set man­ager, held sim­i­lar view to­ward the global mar­kets, be­liev­ing that volatil­i­ties could rise again af­ter the sum­mer’s global eq­uity sell-off.

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