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CPPIB Focuses on Asia
Tara Perkins of the Globe and Mail reports, CPPIB's Wiseman focuses on Asia:
Mark Wiseman, the man in charge of investments at the Canada Pension Plan Investment Board, has a habit of checking his wrists.
It’s something he started a couple of years ago, but these days he’s doing it all the time.
That’s because on his frequent travels to Asia, Mr. Wiseman collects cufflinks with Asian pictures and patterns.
“I
have them on almost every day,” he says. “I like them, but I also
think it’s good to wear them to remind myself that I’ve got to be
thinking about Asia.”
His taste in accoutrements isn’t the only
thing that’s changed in the past few years. Asia has eclipsed Europe in
his travel schedule. “It’s not that Europe is unimportant, it’s just
relatively less important,” he says.
Mr.
Wiseman and his fellow executives are increasingly turning their
sights to Asia in an effort to ensure the fund’s required future growth
trajectory. It’s estimated that CPP contributions will exceed the
amount the plan pays out each year until the end of 2021, after which
some of the fund’s investment profits will be needed to help pay CPP
benefits.
The CPPIB opened its first office outside Canada in
Hong Kong in early 2008, and its only other foreign office is in
London. In September, Mr. Wiseman made the trek to Hong Kong for the
opening of a new, larger, CPPIB office.
“We were already out of space,” he said. “Our growth [in Asia] has exceeded our expectations.”
The office has roughly 15 investment professionals and five support staff, but
that’s expected to double.
The
CPPIB has already committed more than $1.6-billion to eight private
equity funds that focus on greater China and smaller emerging countries
in Southeast Asia (excluding India). It has almost $350-million
invested in China’s real estate market and more than $1-billion in a
passive index portfolio that trades in Hong Kong, out of a total
portfolio of $138.6-billion.
But
what’s causing Mr. Wiseman some anxiety is the fact that less than 1
per cent of the fund’s assets are directly invested in China. Although
the CPPIB is already ahead of many peers in China, Mr. Wiseman is
working to ensure that it substantially ramps up its investments in the
country, and that the fund has access to the phenomenal economic
growth expected to continue there.
“The reality is that China
will be the largest economy in the world,” he said during an interview
in his office, as he pointed to a presentation that was recently given
to the fund’s board of directors. “To go to the United States or Europe
[to invest] is an easy thing to do, but it’s not reflective of what
the world looks like today and it’s certainly not going to be
reflective of where the world’s going to be long term.”
Over
time, CPPIB wants to become a player in India and other areas of
Southeast Asia. “We’re focused on building a presence in emerging
markets, but China’s the logical place to start,” Mr. Wiseman said.
The
fund’s strategy has been to find partners with local knowledge,
including big North American names such as KKR Asia and TPG Asia, but
mostly Chinese-based private equity firms such as CITIC Capital and Hony
Capital.
“We know we’re going to get taught some lessons along the way, and so we’re not jumping in with both feet,” Mr. Wiseman said.
But
as it learns from the locals and assembles its team on the ground,
CPPIB is setting the stage for its first large direct investment in
China. It has hired Peter Chen, a direct investor who was a founding
member of Bain Capital Asia and prior to that was a manager at General
Electric Corporate Financial Services, with responsibilities for greater
China.
Asked whether CPPIB has created a position as head of its Asian business yet, Mr. Wiseman said “stay tuned.”
A
number of large funds are increasingly setting their sights on Asia.
There are tremendous opportunities in Asia, but there will also be some
major hiccups along the way. Nouriel Roubini is the latest economist to
warn that China is overheating.
Finally, I invite you to carefully read the Absolute Return Partners' November commentary, Four Rather Sick Patients. I quote the following:
The
problem in a nutshell is that many EM currencies are either explicitly
or implicitly tied to the US dollar, and US interest rates are far too
low to suit the fast growing economies of Asia and Latin America. Hence
the lax monetary policy in Washington is not only creating asset
inflation in the US (and therefore also by implication elsewhere), but
consumer price inflation in emerging market countries across the world.
This
is no different from the benefits enjoyed by countries such as Ireland
and Spain when they joined the eurozone. They feasted on low interest
rates for years but, ultimately, reality caught up. Governments
in many emerging market nations are now repeating those mistakes, and
it can only end in tears; however, it will take time. In the meantime, there will continue to be considerable upward pressure on EM currencies.
Will
there be tears in EMs and China? It's possible but I remain more
optimistic, believing the Chinese will use their vast foreign
exchange reserves to spur new industries like alternative energy and
keep growing their way into the next decade. Is CPPIB wrong to place so
much focus on Asia? Not at all. They need to build an extensive network,
investing in both public and private funds in Asia, and capitalize on
opportunities as they arise. But Mark Wiseman is right, they will be
taught lessons along the way, and there is no rush to jump in with both
feet.
»
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China = biggest bubble in human history, by a factor of *at least* 5.
Leo, give it the fuck up, you retard, with this optimistic shit.
It's a real shame you MAY actually be managing people's money.
If Pension Funds are investing in Asia, you can be sure Asia is a Bubble waiting to collapse.
RE
Exactly. Thank the great God Bibbi, that no pension fund manager is in any way implicated in my future or that of my grandchildren.
Ruh-roh.
Leo Kolivakis
" I remain more optimistic, believing the the Chinese will use their vast foreign exchange reserves to spur new industries like alternative energy and keep growing their way into the next decade."
Ah, so...like "Solar" alternative energy...which that big empty city is using as primepower - OK OK i see the kinda hidden reason for "Chinese Solar" bets you've suggested....
1 Gigawatt i think, but no Chinese 'brag' for some reason?...of course, THAT will require alternative to the solar power, at night, during heavy cloud cover....'base-load power...such as coal, nuclear' or 'pumped storage, water reserviour -but 350 megawatts is about the biggest in California...specifically for load/source leveling...of the wind farms just 30 miles to the north, near Livermore (nuclear) laboratories...
So, for every "Solar watt/hour" there also needs to be, something to make up times of no power....
Dope will get you through times of no money better than money will get through times of no dope. The Furry Freak Brothers. But, seriously; Germany is the world headquarters for "alternate energy" enthusiasm; and they're beginning to wake up and feel the hang over from the kool-aid. The pay a huge electric bill every year to France; the only country in Europe that has its head screwed on straight. It's just recently become permissible to print articles in the German press about the fact that the enormous investment in solar panels is essentially worthless.
My first solar ... Lol'
JinkoSolar Holding Co., Ltd.Buy low.
Lots of outfits hanging shingles out here. They know they should be looking at Asia, but don't understand what they are looking at.
Private Equity in China is really venture capital, not leveraged finance. Try and reach critical mass doing VC deals in China...
When markets here heat up, the smart money is always looking at the exit door. I suspect lots are doing as much right now.
"They know they should be looking at Asia, but don't understand what they are looking at." Perfect. Chinese capital enterprise is like some kind of Alice in Wonderland creature; it's somewhat familiar, but it continually astonishes one with its bizarre idiosyncracies.
There interested in Asia because of two things. One, they don't trust europe or the US anymore in regard to financial matters and don't want to take a drumming again. And two, they need to get quick returns for the retires who are about to retire.
Yes. the tremendous opportunity consistis in getting something for nothing. Buy some shares in an enterprise and the share value itself appreciates, perhaps faster than inflation, perhaps, not; but you collect dividends. This first became possible on a wide scale during the British Empire, later it was possible during the American Empire. Real growth spins off wealth. Real growth is dead now. As dead as tinkerbelle. Within twenty months it will be rrevealed that their new larger facility is too large. This will not end well.