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Canada pension fund sees long-term India opportunity
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Canada pension fund sees long-term India opportunity

18.08.14

The Canada Pension Plan Investment Board, one of the world’s largest pension groups with assets of $229bn, plans to ramp up its activities in India, joining a rising tide of interest from long-term investors in Asia’s third-largest economy.

Mark Machin, international head of the fund and former head of investment banking in Asia for Goldman Sachs, told the Financial Times that Canada’s largest pension group aimed to expand its investments across a range of asset classes, including private equity and private credit, in anticipation of long-term growth in India.

CPPIB entered India in 2010 but has recently raised its profile with a series of deals involving long-term assets such as toll roads and residential property, creating a portfolio of planned investments worth $1.4bn that already ranks among the largest investments in the country by a foreign pension fund.

“Because it is a very small percentage [of the fund’s overall assets], clearly it is likely to grow, as India keeps growing and developing,” Mr Machin said.

“We will almost inevitably have more money focused on India. . . It is one of the most important markets for us in the region,” he added.

The growing interest of Canadian and other global pension funds in India, including APG of Holland, which announced a $1bn property investment fund last month, is seen as an important source of fresh capital for sectors starved of funds such as power and infrastructure.

Interest in India among foreign investors of all types has been renewed by the election this year of Prime Minister Narendra Modi, who has promised to ease investment restrictions and build a wave of new infrastructure projects.

In June, CPPIB announced a $332m infrastructure investment partnership with a division of Larsen & Toubro, India’s largest engineering group by sales. That followed deals to invest in real estate with two family-owned conglomerates, the Piramal and Shapoorji Pallonji groups.

The fund has also built up large portfolios in Australia and China, with deals worth $5.9bn and $4.1bn respectively, in assets ranging from property development to logistics.

Mr Machin cautioned that CPPIB – which he described as “pretty much the ultimate in long-term money” – would invest patiently, seeking additional local partners for infrastructure and property projects while also considering public equity market investments, either in funds or individual companies.

He said the fund was also examining providing private credit to Indian companies in areas such as loan restructuring. “We’ve seen a lot of private credit opportunities . . .  things like power plants, and telecom-related assets, or roads or infrastructure . . . but they have to be priced correctly,” he said.

While the installation of Mr Modi’s government in May had no direct effect on CPPIB’s plans, Mr Machin said any policy reforms that boosted India’s long-term prospects or eased investment rules would also encourage greater investment by the fund.

“If there are positive policy changes which shift economic growth and the openness to foreign investment – if those two things change, we are likely to have more money invested over time,” he said.

Earlier this year CPPIB opened a local office in Brazil, its first in a developing economy, but the fund declined to comment on domestic media reports that it would set up a similar presence in India over the next year.

By James Crabtree in Mumbai
Financial Times