The Canada Pension Plan Investment Board is partnering with a New York-based asset manager to invest in equity tranches of collateralized loan obligations.

The partnership with Sound Point Capital Management, which is worth US$285 million, is through the CPPIB’s subsidiary CPPIB Credit Investments Inc. It will purchase equity in Sound Point’s collateralized loan obligations over several years.

Collateralized loan obligations have shown good long-term returns, according to the CPPIB, which noted they help diversify its portfolio as it pursues better risk-adjusted returns in comparison to traditional fixed income and equities.

Read: CPPIB issuing green bonds, investing in Chinese tech company

“CLO equity is an attractive asset class that enables us to further broaden and diversify our overall credit investments portfolio and offers a compelling source of risk-adjusted returns for the fund,” said John Graham, senior managing director and global head of credit investments at the CPPIB, in a press release.

“We are pleased to launch a CLO partnership with Sound Point, a top-tier manager with a demonstrated ability to consistently perform, a strong credit culture and operational expertise. We look forward to identifying more potential partners with unique offerings for this multi-manager CLO equity strategy.”

As of June 30, 2018, the CPPIB’s credit investments portfolio totalled $25.6 billion with investments in structured credit and financials, leveraged finance, public transit, real assets credit and intellectual property, spread across North America, Europe, Latin America and Asia Pacific.

Read: CPPIB invests in Australian toll road

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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