Caisse cautious on London over Brexit

CEO also pans Boeing over subsidy charges

NEW YORK • Caisse de dépôt et placement du Québec, one of the world’s biggest real estate investors, is holding off on major investments in London real estate amid uncertainty over the impact of Britain’s planned exit from the European Union.

Canada’s second-biggest public pension fund has been an enthusiastic investor in Britain and earlier this year agreed to finance the expansion of London’s Heathrow airport in which it is one of the biggest shareholders.

Until recently, London was one of the cities the Caisse was most committed to investing in along with New York and Shanghai.

“That is still certainly true for Shanghai, true for New York,” Caisse chief executive Michael Sabia told Reuters in an interview.

However, the Caisse has turned more cautious on Britain’s capital after Prime

The Caisse, which manages public pensions for retirees in Quebec, has a dual mandate both to maximize returns for depositors and support economic growth in the province.

A $1.5-billion investment in Bombardier Inc., headquartered in Montreal, has been slammed by U.S. rival Boeing Co. as an unfair subsidy but Sabia rejected that characterization as “absolute nonsense” on Wednesday.

Caisse is embarking this year on the construction of the world’s third-biggest public transit system in its home city of Montreal, a groundbreaking project which will see the pension fund take responsibility for both the funding and construction.

The $6-billion project, which has also received funding from the Quebec government and the federal government, is seen as a test case by other pension funds which normally prefer to invest in ‘brownfield’ infrastructure that has already been built rather than take on the construction risk through a ‘greenfield’ project.

But competition for assets such as roads, bridges and tunnels that have already been built has intensified as investors look for alternatives to low-yielding government bonds and volatile equity markets.

Sabia said he believes the Caisse will have an advantage over rivals from developing the skills in-house to manage the construction of new infrastructure and wants to replicate the model in the United States and Europe if it succeeds.

He also argued that much infrastructure development falls between the two, citing Heathrow Airport, where the infrastructure is being expanded, labelling them ‘khaki’ projects.

“You’ve got to have the capacity to work across that spectrum, to have a full product offering is something that’s going to differentiate yourself in the market.”

The Caisse invests money on behalf of workers and retirees in the province of Quebec and Sabia admitted that there would be reputational risk if money was lost on the Montreal transit project.

“Doing things differently and some degree of innovation always comes with some risk. If those reputational issues are so big in your mind then you’re condemned to live in the status quo for ever.

“In an investment world that’s changing as much as we think it is changing, staying in the status quo means you’re toast.” The Caisse agreed earlier this year to finance the expansion of London’s Heathrow Airport, in which it is one of the biggest shareholders, but has turned more cautious after the election in which Theresa May lost her majority.