For FY23 you reported a return of 1.3%. What impacted the return?
Public markets were challenging for sure. During that time period, our private markets did okay. Real estate, as realty did around the world, struggled. But we also got an uplift from the US dollar. During periods of market selloff, the US dollar certainly strengthens. We have quite a few US-denominated assets and so they benefited from the US dollar appreciation, but certainly our public markets portfolio last year didn’t perform as well. And our private markets performed a little bit better.Did you face significant headwinds in your large tech investment portfolio given that tech has seen quite a bit of a meltdown?
I would not classify it as large. We have a broadly diversified global portfolio, and our growth equity portfolio is quite small compared to our more traditional private equity portfolio. I think tech is a higher beta sector, and you have the expectation that you will have more volatility in your higher beta sectors. But as a long-term investor, the key is to hold the positions and hold them through the volatility.
Considering the global volatility in public markets, would you naturally lean more on private equity? Is there a binary there?
No, we continue to be constructive on private equity as an asset class and we’ll continue to invest in it. But for CPP Investments, we don’t have hard allocations into public or private and a lot of it is based on the opportunity. Over the past year it has been kind of well documented, at least within the US and Europe, that private space has not been as active as it has been historically. A lot of our activity in the past year has actually been in the public space, where we’re seeing good relative value.
‘Will acquire right assets 100%’
We’ve actually been active in the public real estate space, the REIT (real estate investment trust) space, where we see good value. Part of the value of having both public and private, is the ability to pivot between the two where we see value.Considering global geopolitical flux, are you pulling capital out of China and redeploying more into India or other emerging markets?
We have not dialled back any of our active programmes in any of the geographies we invest in. That being said, if there’s not a lot of activity level in a given geography, we’re not doing a lot either.
Has India been a standout market for you in the region?
When I look at our Indian portfolio, one of the things that I’m really encouraged by is the breadth of our investment portfolio. It’s not just one sector. We have equities, across financial services, technology, healthcare. We have infrastructure, we have renewables, we have credit, real estate, so we have exposure across a broad set of asset classes. So even within the geography, there’s real diversification. We continue to be very committed to India, and part of it is because of the depth of the market and the ability to build a diversified portfolio within India. So it’s challenging to compare to other jurisdictions where you may not have as diversified a portfolio.
Some global CEOs have stated that other countries like Vietnam, Philippines, Indonesia, Malaysia have thus far been bigger beneficiaries of this global disruption of the supply chain, the so-called China+1 strategy. Do you think they have a point? Or do you think that India actually is being the trailblazer?
The decoupling, the de-risking that is going on, it’s a global phenomenon. And the big economies in the world, the US and such, are looking to domesticate strategically sensitive industries, sometimes for national security reasons. Over the past year, there’ve been many beneficiaries to this, including the US itself, including Mexico and Canada, and many more. What is very interesting right now as a global investor, is watching how the world is trying to rewire itself and how to participate in that rewiring.
You have invested C$22 billion in India, amounting to around 4% of your global portfolio. Where do you see that growing to, in the next three to five years?
We don’t have hard allocations into countries, and it is based on the opportunity set.Our expectation is that this (India) portfolio will continue to grow, and will continue to grow relative to the broader portfolio and for a few reasons. One, we have committed to putting people on the ground in India and developing that local knowledge, which is a signal of our commitment to investing in the country, and our desire to grow our exposure. Two, we now have a C$22 billion portfolio, and we want to grow these companies, we want to continue to invest in these companies and grow them. And we’re always looking for new investment opportunities. So we expect the portfolio to grow with existing partners, we expect to develop new partners, and find new investment opportunities. And so we certainly expect it to grow.
