Canadian pension fund plans to set up a credit arm in India
CPPIB to boost its emerging-market strategy by entering capital-starved sector
The Canada Pension Plan Investment Board, one of the world’s largest retirement funds, plans to start a credit arm in India, seizing on a moment when the country’s troubled financial system is starved of capital.
CPPIB is putting together a credit strategy for India, international investment head Alain Carrier told the Financial Times, which could see the C$392bn ($297bn) fund build on its Indian real estate and infrastructure investments by partnering with non-bank providers to offer debt or enter the market directly.
“This is something we’ve had a very
close look at,” Mr Carrier said. “There is a study of the market that has been under way, and we think there are a number of opportunities for us — there are a few areas that we can play.”
Analysts say India suffers from a chronic shortage of credit, with banks unwilling to provide funding for longterm projects such as infrastructure. Amar Ambani, president of brokerage Yes Securities, said that is where a longterm minded investor could excel.
Vikram Gandhi of VSG Capital Advisors, an adviser to CPPIB in India, added: “There is massive growth that is required, it is a huge priority from a policy standpoint. Creating more jobs is a huge priority from a policy standpoint, but there is no investment happening.
“That is where we see [the opportunity] for funds like us and others with the ability to structure interesting transactions to provide credit.”
CPPIB has become an important foreign investor in India since opening a Mumbai office in 2015, part of a global strategy to focus on emerging markets where it hopes to enjoy higher rewards than its home base of North America.
The fund has invested almost C$9bn, roughly 2 per cent of its total assets, in India and intends to increase that share, Mr Carrier said. A net return of more than 13 per cent on its Indian investments in the year ended March beat its overall returns of 9 per cent.