Trump's War of Words With North Korea Doesn't Spook CPPIB

  • Country’s largest pension fund grows assets to C$326.5 billion
  • Machin says India, Europe and the U.S. attractive regions

Why Trump's War of Words With N. Korea May Be Overblown

The escalating war of words between U.S. President Donald Trump and North Korean leader Kim Jong Un is having little impact on the investment decisions of Canada Pension Plan Investment Board, according to its chief executive officer.

Mark Machin, head of the country’s largest pension fund, said he’s planning to visit South Korea in September, and still sees plenty of opportunities to invest in the U.S.

"We have about C$6 billion ($4.73 billion) in South Korea and we’re quite happy with the investments. They’ve done quite well over time," Machin said in an phone interview Friday. "The U.S., despite the noise, continues to be a massive capital market with really interesting opportunities across the board. You’ve seen that where we’ve invested in energy, real estate, private equity, and private credit."

Markets have been rattled by the geopolitical confrontation as Trump ratcheted up the pressure on North Korea to dial back its nuclear ambitions and Kim threatening to fire missiles toward the U.S. territory of Guam. Markets calmed somewhat on Friday with the S&P 500 rebounding from its steepest drop since May.

Machin said he watches all of these geopolitical situations closely. But CPPIB has made an effort to expand both geographically and by asset class to ensure that its portfolio can withstand a shock to any one region or sector, he said.

He noted that the markets have been resilient, in part, because of the amount of capital big investors have to deploy.

Huge Liquidity

"Whether it’s public markets or private assets, you look at $800 billion to a trillion dollars in dry powder in private equity around the world, these are huge numbers," he said.

CPPIB said in a statement Friday its net assets grew 14 percent to C$326.5 billion as of June 30 from the same period a year ago. The pension fund posted a net investment return of 1.8 percent for the first fiscal quarter of 2018, up from 1.45 percent a year ago for the three months ended June 30.

The pension fund’s investments in the quarter included an agreement to acquire Houston-based real estate investment trust Parkway Inc. for about $937 million in June. CPPIB also partnered with Baring Private Equity Asia Ltd. to acquire Hong Kong-based international school operator Nord Anglia Education Inc. for about $1.1 billion.

Since the quarter ended, CPPIB said it had partnered with Allianz Capital Partners to acquire a 20 percent stake in Gas Natural SGD SA’s gas distribution business for about $1.78 billion earlier this month. It said July it had agreed to acquire Royal Dutch Shell Plc’s Irish exploration and production business for as much as $1.23 billion.

Machin said the pension fund continues to see a lot of opportunities in places like India and the U.S. The European market is starting to look attractive again too, he said. "We’ve seen a big upswing in valuations there," he said.

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