CPP Investments' APAC chief shares secrets of its success
The combination of scale and reinvestment creates a powerful compounding effect, according to Agus Tandiono, senior managing director and head of Asia Pacific and active equities Asia at Canada Pension Plan Investment Board (CPP Investments).
"One of the key factors contributing to our success is our scale. As a large global investor, we have the ability to access opportunities that may be out of reach for smaller players,” Tandiono said during AsianInvestor’s 19th Asian Investment Summit, the day following the fiscal year report.
At the end of the 2024 fiscal year, CPP Investments reported net assets totaling $463 billion, an annual net return of 8.0%, and a 10-year net return of 9.2%, resulting in a cumulative net income of $432.4 billion since its inception in 1999.
CPP Investments
However, it's not just the size of the fund that gives CPPIB its edge, but also the way in which returns are utilised, he said.
“Our scale is growing because we do not have redemptions on our profit. Whatever we generate — in this case the 8% return — is reinvested,” said Tandiono.
The second edge, according to Tandiono, is the firm’s long-term horizon, which allows the fund to deploy capital into investments that may not be suitable for investors with shorter time frames.
“The Chief Actuary of Canada confirmed that we are financially sustainable for the next 75 years. With that long-term capital, we can deploy into investments that are long-term in nature — infrastructure projects, real estate, and private equity, which often require a patient and committed approach,” he said.
ASIA ALLOCATION
At the core of CPP Investment’s investment strategy is active management and diversification.
“We're diversified across asset classes and geographies, with investments in 56 countries. That's how we built a portfolio of C$632 billion,” said Tandiono.
“Asia represents about 21% of our global investments, at around C$133 billion, and we invest in three of the largest geographic areas by AUM: Greater China, Japan, and India. All investment departments are represented, from private equity to real assets and public equities,” he said.
To effectively deploy capital in the Asia Pacific region, CPP Investments focuses on identifying key markets and trends that offer the greatest potential for growth.
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"Asia is really diverse. We have developed markets like Japan and Australia, and emerging markets like Indonesia, India, and China. Two of the top three economies in the world are in Asia – China and Japan – and two of the largest emerging markets, China and India, are also in Asia," he said.
EYES WIDE OPEN
The diversity of Asia provides many options, but it also creates the need to decide where to place the fund’s capital in order to have the biggest impact, said Tandiono.
“For risk assessments and mitigation, we believe in local knowledge, which is why we have offices in Mumbai to invest in India, Hong Kong to invest in Greater China and across Asia, and Sydney,” he said.
“Local knowledge is very important because you need to do due diligence, understand local corporates, and know the good, the bad, and the dangerous. Then you invest with your eyes wide open.”
Overall, CPP Investments has more than 328 global partners, from private equity GPs globally, to local private equity partners in India and Korea.
“In Asia Pacific private credit, we have partners across the region and within each market. For real estate, when we build logistics companies or data centres, we also have local partners, and in infrastructure too, such as in Indonesia,” he said.
CPP Investments also invests through a number of hedge funds to better understand trends and investment theses.
“For innovative risk management, we look at it as an integrated risk framework. We don't just look at the risks and volatility of security selections, sectors, asset classes, and geographies. We also look at reputational risks when we invest in a company and sustainability,” he said.
A UNIFIED BODY
At CPP Investments, the innovative "one fund" philosophy is a cornerstone of their strategy, particularly evident in their approach to managing a diverse and robust investment portfolio across Asia.
"Rather than private equity competing with other private equity, or private debt competing with other private debt, when we come to the table, we come as one CPP Investments, or what we call ‘one fund,’" said Tandiono.
This unified approach enables CPPIB to effectively leverage its broad expertise across various financial domains.
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“For instance, if an investment in private equity reveals a company's need for private credit, we can swiftly introduce our private credit team, capitalising on pre-existing knowledge and relationships,” he said.
"We've had a few successes like this where we get outsized allocations because we did the work early, we know them, and we fund them," Tandiono notes.
Moreover, this strategy extends to long-term engagements.
"We also tell them that when they go public and get listed, our public equities team can evaluate and invest in them," he said.
“By operating as a unified C$632 billion fund, we not only maximise our internal resources but significantly boost our competitive edge, creating a cohesive and powerful investment force.”