The investment manager for Canada Pension Plan has added two new business lines in Asia and is seeking further hires as it strives to increase its on-the-ground capabilities in the region.
The Canada Pension Plan Investment Board (CPPIB), which says it has almost C$20 billion in Asia-Pacific out of C$170 billion globally, has hired Nina Tao to head its private debt desk out of Hong Kong.
The private debt group makes direct corporate investments in leveraged loans, high-yield bonds, mezzanine and other debt solutions across the capital structure. It participates in event-driven opportunities such as acquisitions, refinancing, restructurings and recapitalisations.
Its target hold position is between $50 million and $500 million. To date the group’s primary focus has been on opportunities in North America and Europe, so this is the first time it has had a private debt desk up and running in Asia.
Tao will be seeking to build a team out of Hong Kong. She has been at Mount Kellett Capital since 2008, most recently as head of transactions for Asia. She has also worked at Deutsche Bank, Invesco and Merrill Lynch.
Further, CPPIB has also recently set up a regional Relationship Investments business out of Hong Kong that focuses on private investment in public equity (Pipe) deals.
This is being led by Deborah Orida, who has been a senior portfolio manager for the board for over three years but transitioned into this role in the past few months. She previously spent nine years at Goldman Sachs.
It means that of Toronto-based CPPIB’s 12 business lines, it now has six or seven up and running in Asia, although AsianInvestor understands it has no intention of opening other departments from its $100 billion public markets department in the region anytime soon.
Mark Machin, who joined the CPPIB in a new role as president this March, agrees that the fund’s exposure to Asia-Pacific is substantially underweight relative to the size of its economies, although he makes a differentiation when it comes to the addressable market.
“As the fund grows we will have more and more investments in Asia,” he tells AsianInvestor in a phone interview from London. “We have net inflows and we will continue to grow in the future, so the investment in Asia will increase substantially.
“We have hired [Tao] to start our private debt desk in Asia, so that is an area of growth for us. Likewise on the Relationship Investments front, we have just started that business. Over the next few years we hope to build significant relationships and make some good Pipe investments.”
He adds that the fund’s goal is to build a first-class investment organisation that can assess the opportunities across the region’s major markets within its investment spectrum, which stretches from real estate and infrastructure to private equity and public markets.
Earlier this year CPPIB committed $400 million to a China logistics project in conjunction with its partner and ASX-listed property group Goodman, as reported.
And Machin confirms that CPPIB is also seeking additional QFII quota to access China’s capital markets, having been awarded a $100 million quota in March this year.
He adds that the fund sees growth opportunities in its hedge fund investing business, which it started in Asia a year-and-a-half ago. So far it has deployed funds in Hong Kong, Singapore and China, but “we will probably look further across the region”, he says.
As for private equity, Peter Chen has been senior principal of CPPIB's regional principal investing activities since joining from Bain Capital in 2009.
Primarily the team has partnered general partners via capital commitments from $50 million to several hundred million per transaction. Typically a GP’s investment holding period is 3-5 years, and CPPIB may opt to stay invested longer than that.
Its principal investing business is concentrated on five core markets – China, India, Australia, Korea and Japan – and is sector-agnostic. Chen stresses the importance of having an Asia-based team on the grounds that “private equity is a very local business”.
He points to the challenges of investing in a market with small deals and new entrants, although balances that with the obvious attractiveness of an emerging and growing market for a long-term investor. “Increasingly people have started to understand and respect long-term capital,” he says.
Asked where he sees potential, Chen replies: “China will always be a constant because it will continually generate interesting growth stories and most companies there are still private.”
He also points to the industry development cycle in which publicly listed companies will also seek to become private again. “We are only on the rise of the first cycle,” he states.
Chen adds that CPPIB is seeking to expand the principal investing team in Asia. “You need a certain critical mass so you can collectively brainstorm, with a certain level of seniority and experience, and to try enough opportunities to increase your yields.”