A new partnership between the Public Sector Pension Investment Board and BCE Inc. was built out of an ongoing dialogue and a desire to support “Canadian champions” in their growth ambitions, says Sandiren Curthan, managing director and global head of infrastructure investments at PSP Investments.
“The broad picture, is that fibre penetration is lower in the U.S. than in Canada and Bell wants to use the expertise that they have in Canada to drive penetration in the U.S.”
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PSP Investments has been in conversation with Bell around its growth and capital recycling programs, but a deal materialized between the two through a telecommunications infrastructure expansion plan.
Through a new joint venture named Network FiberCo — owned by the investment organization with a 51-per-cent ownership stake through a US$1.5 billion commitment — the two organizations are betting on the expansion of fibre infrastructure in the U.S.
“Bell and Ziply Fiber are fantastic operators and what they wanted is a partner who understood really well how to build infrastructure in the long-term as a financial investor and that’s what we’re bringing [to] the table.
“The relationship is very simple. Ziply is the internet service provider, they will pay a fee to that network to use the fibre that we’re going to build. That’s the genesis of a transaction.”
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Curthan says the infrastructure team at PSP Investments, which manages about $35 billion worth of assets, looks to split its allocations across minority (40 per cent), controlled (40 per cent) and funds (20 per cent) investments. It defines its infrastructure strategy by platforms spread across airports, roads, telecommunications and renewables.
“A platform is basically when we decide to back a management team that has the ability to develop, construct and operate assets,” he says. “It could be across one or several geographies or in sectors where we think there are strong tailwinds.”
After a busy period of dealmaking at PSP Investments, including acquisitions in the airport sector, he says it’s now the time to integrate any new assets into the investment organization’s asset management framework. Looking ahead, he adds, there’s an impetus to increase exposure in North America through assets that provide inflation and downside protection.
“The other thing that I would like to do more is try to use a home turf advantage in Canada to . . . basically to make it more competitive for us.”
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Throughout last year, pressure increased around the idea of whether the biggest Canadian pension funds should invest more domestically. The question even reached the federal government as former Finance Minister Chrystia Freeland tasked former Bank of Canada governor Stephen Poloz to create a working group and explore how to incentivize domestic investments.
Following the work of Poloz’ group, the feds announced last December they would remove a cap restricting Canadian pension funds from owning more than 30 per cent of the voting shares of a Canadian entity.
In its most recent annual report, PSP Investments said it holds $56 billion in exposure to Canadian assets across public equities, real estate, natural resources and infrastructure.
“The reality is we would love to do more in Canada and we don’t necessarily need someone to tell us to do more in Canada. . . . I think ultimately our job is to find the best and the most appropriate risk adjusted return. If it’s in Asia or it’s in Canada, it doesn’t really matter.”
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