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UPDATE 1-Canada Pension Plan losing out on infrastructure deals

Published 2017-05-18, 03:02 p/m
© Reuters.  UPDATE 1-Canada Pension Plan losing out on infrastructure deals

* CEO says CPPIB 'consistently outbid' for infrastructure

* CEO says U.S. infrastructure plan a 'massive opportunity'

* CEO says not looking to provide finance to Home Capital

* Net investment return 11.8 percent in 2016/17 fiscal year (Adds comments from interview with CEO)

By Matt Scuffham

TORONTO, May 18 (Reuters) - The Canada Pension Plan Investment Board (CPPIB), one of the world's biggest infrastructure investors, is regularly losing out in bidding wars for such assets, its chief executive said, as investors seek alternatives to low-yielding government bonds.

The CPPIB is one of the world's biggest investors in infrastructure such as roads, bridges and tunnels, but its CEO, Mark Machin, said high valuations were making it harder to do deals in the current environment.

"We are consistently outbid for assets around the world because they are really priced almost to perfection and there's an enormous amount of capital chasing infrastructure, particularly in developed markets," Machin told reporters on Thursday after the fund reported results for its last fiscal year.

The CPPIB did acquire a 33 percent stake in Pacific National, one of the largest providers of rail freight services in Australia, for about A$1.7 billion ($1.3 billion) last year but was generally less active in infrastructure than it has been in previous years.

Machin said the current imbalance between supply and demand in the global infrastructure market could change if U.S. President Donald Trump proceeds with a $1 trillion infrastructure plan.

"If policy (makers) in the U.S. got their act together that would produce a good home for a lot of capital looking for that type of opportunity," he said.

In an interview with Reuters, Machin said he anticipated Trump's infrastructure plan would present a "massive opportunity."

"It could be huge," he said. "We've got plenty of firepower and expertise to look at those opportunities when they arise."

The fund, which manages Canada's national pension fund and invests on behalf of 20 million Canadians, reported a net return of 11.8 percent on its investments last year, helped by its strategy of diversifying across asset classes and geographies.

The performance represented a significant improvement on the year before, when the fund achieved a net return of 3.4 percent.

The CPPIB said it ended its fiscal year on March 31 with net assets of C$316.7 billion ($232.2 billion), compared with C$278.9 billion a year earlier.

Machin ruled out the possibility of CPPIB providing funding to Home Capital, Canada's biggest non-bank lender, which is struggling to finance its assets. not something that, as far as I'm aware, any of our teams have been looking at closely," he said.

($1 = 1.3638 Canadian dollars)

($1 = 1.3461 Australian dollars)

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