Canada can attract more institutional capital due to its stable, predictable and transparent market, said John Graham, chief executive officer at the Canada Pension Plan Investment Board.
During a speaking engagement at the Canadian Club Toronto yesterday, Graham said he has received more calls during the past six months from large international investors about allocating to Canadian opportunities. He’s encouraged by how fast Canada is creating a good investment destination.
“Speed matters and you’ve got to get momentum going, because once you get some momentum and once you get some inertia, it’s hard to stop it. You can see in other parts of the world they’re moving at pace and it’s important that we move at pace right now.”
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The CPPIB is particularly interested in opportunities related to energy and digital infrastructure, a necessity for the country moving forward. In his experience, institutional investment capital is fluid and can even be mercenary since it will always flow to opportunities of least resistance in well functioning economies and unified markets that can bring down unnecessary friction.
“Policy makers of all political stripes, federal and provincial, are working together to unlock this country’s potential and I’m confident they can do it.”
He’s closely watching the federal government’s impetus for nation-building infrastructure and energy projects, with the financial support of institutional investment. The CPPIB’s holds approximately 12 per cent, or about $114 billion, of its portfolio exposure in Canada and it’s looking to grow it when the right opportunities become available, he said.
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“We like to see opportunities of scale, we like to see opportunities where we can grow our capital, . . . we are really encouraged by what we’re hearing and really encouraged by the major projects initiative.”
The decisions of policy makers around the world, particularly in the U.S., has challenged the decision making of institutional investors, but Graham isn’t sure if this period of unpredictability is a trend or the new normal.
“I don’t know if this is the norm now but it is something that we have to adapt to and, as a long-term investor, we certainly believe in mean reversion but we also believe that sometimes regimes change.”
The CPPIB isn’t interested in chasing investment trends and Graham said it’s explicitly not chasing U.S. public equity markets, which he sees as creating an unacceptable concentration risk. The world is unpredictable with no safe harbour present for investors, he said. “We continue to believe that it is important to be geographically diversified.”
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