* Pension funds look at stepping in as rival investors flee
* Calgary bars filled with bankers eyeing up deals
* AIMCo sees "great values" in energy sector
* Caisse says remains wary of "exogenous risk"
By Matt Scuffham
CALGARY, Alberta, March 2 (Reuters) - Executives at some of
Canada's biggest pension funds say they are looking more closely
at the oil and gas sector, attracted by low valuations, but will
take a scrupulous approach to deals given the uncertain oil
price outlook.
The funds say they are prepared to overlook depressed oil
prices in the short term if it means they can directly invest in
assets at knock-down prices, especially as rival investors
retreat and lenders get tough with struggling firms.
Pension funds are under less pressure than other investors,
such as private equity, to hit short-term targets and may be
able to cherry-pick assets.
"We see some great values because, unfortunately, there is
capital that is leaving Alberta as the oil price sinks. So we
see excellent opportunities for long-term investors," said Kevin
Uebelein, chief executive of Alberta Investment Management
Corporation, which manages C$90 billion ($67 billion).
Oil started to sell off in mid-2014 when a global supply
glut from excessive U.S. shale crude production began to
pressure prices at above $100 a barrel. U.S. crude oil CLc1
settled at $34.66 a barrel on Wednesday.
Fund industry executives talk of Calgary's bars and
restaurants being full of Toronto and New York investment
bankers, in town to size up investments in anticipation of a
wave of deals.
A possible trigger could come when banks conduct debt
covenant reviews this spring that may reduce credit for some
energy clients.
Canada's biggest pension funds, such as the Canada Pension
Plan Investment Board and Ontario Teachers' Pension Plan, have
for years sought investment alternatives to volatile global
equities and low-yielding government bonds.
Bankers say oil and gas assets across North America could
prove attractive to them, especially so-called midstream plays
like pipelines and storage tanks.
"The pension funds will definitely be active in the energy
space and are keenly studying some of the assets that are
currently in the market, both midstream and upstream," one
Calgary-based banker told Reuters.
INFRASTRUCTURE ASSETS
Another Calgary-based banker said pension funds were
particularly interested in energy infrastructure.
"We have distressed sellers looking to de-leverage and the
only assets they can sell right now and get bids on are
infrastructure assets like pipelines and processing facilities,"
he said.
Canada's 10 biggest public pension funds, which have more
than C$1.1 trillion of assets under management, currently have
only modest sums directly invested in oil and gas assets.
Ontario Teachers' is one of the biggest investors with
C$11.9 billion invested in natural resources at the end of 2014.
Last year it bought Cenovus Energy Inc CVE.TO royalty
properties for about C$3.3 billion.
An executive at one of Canada's three biggest public pension
funds, who did not want to be named, said his organization was
looking at setting up an office in Calgary this year to study
possible targets, but emphasized the need to maintain investment
discipline.
"There will definitely be opportunities. It's not for the
faint-hearted though," he said.
Roland Lescure, chief investment officer at Caisse depot et
placement du Quebec CDPDA.UL , Canada's second-biggest public
pension fund, said uncertainty about the sector remained.
"Are we vigilant for opportunities? Yes. Are we being very
cautious because of the exogenous risk right now? The answer to
that is also yes."
($1 = 1.3450 Canadian dollars)
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