Canada's largest pension fund, the Canada Pension Plan (CPP), is on the prowl for China-related investments sourced from Hong Kong. The CPP, projected to hit a total asset size of C$250 billion ($242 billion) by 2016, has recently opened an investment office in the city, simultaneously with one in London for European investments.
It is now actively recruiting investment banking, private equity and consulting professionals for its newly assembled private-equity investment team in Hong Kong. The new hires will be responsible for vetting managers and handling the fund's rising allocation to alternative funds in the region. Between them, Hong Kong and London already host 63 employees.
The Hong Kong office's focus is on investments in private equity and debt, infrastructure and real estate. In particular, its team is charged with building and strengthening its new relationships with partners in the region, as well as enhancing the Canadian fund's overall knowledge and understanding of Asia.
Part of its strategy is to co-invest with other national pension systems, and it is doing this with Asian managers like China's Social Security Fund and Korea's National Pension Service.
Thus far, the fund has committed a total of $450 million to three Asian funds in the region. These include a $200 million commitment to a much-watched newcomer, MBK Partners Fund III, which focuses on investment opportunities in Korea, China and Japan. It has also invested $75 million in a China-based buyout fund Hony Capital, which focuses on the acquisition of state-owned enterprises and growth capital investments in China, as well as a $175 million investment in Citic Private Equity's Citic III Fund.
With the global economic recovery lifting commodity prices, and thereby the Canadian dollar, the fund is concentrating on pumping its "loonie" outwards to emerging markets. It is especially focused on diversifying its investments to new geographic regions and bulking up its use of alpha strategies, by adding to its internal teams. It is most keen on taking on new investments in China, Mexico, Brazil and Turkey.
As of the end of 2009, the fund had a 3.5% allocation, or C$3.6 billion, to Asian markets, and another 3.5% to Japanese investments. The fund's team believes China and India will become the most vital contributors to global growth in the current decade.