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Consolidate pension funds and take advantage of British infrastructure, says Canadian pensions boss

24 May 2012

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The head of one of the world's largest pension funds, the Canadian Pension Plan Investment Board (CPPIB), called upon UK-based pension funds to consolidate in order to "build funds of sufficient scale and capability to become true long-horizon investors".

David Denson, president and chief executive officer of the CPPIB, said that UK-based funds, which are typically smaller and more numerous than their Canadian counterparts, should aim to consolidate in order to take advantage of the infrastructure investment opportunities Britain has to offer.

 "Absent this scale," said Denison, "it is hard to envision the other necessary attributes for success as well, namely strong, professional governance, sophisticated internal capabilities and corresponding human resources policies and practices."

The CPPIB boss, speaking in London at an event held by the British Chamber of Commerce, said: "Over and above encouraging pension funds to operate as long horizon investors and own infrastructure assets, we believe the UK government should also address policy issues that will enable them to do so." He noted that the number of long-horizon investment organizations in the world is small and that policymakers should encourage consolidation and needed to be careful that their decisions did not unintentionally reduce the supply of long-term capital.

"If we conclude that these kinds of risks within any country become significant enough to call into question the predictability and stability of cash flows that are at the heart of the investment rationale for infrastructure we will simply stop investing there," he said.

Denson said the UK has had a long history of private ownership of key infrastructure such as ports, rail, airports, water, gas and electrical distribution and was ranked by CPPIB as one of the best nations for infrastructure investing, in terms of legal, tax and regulatory issues. If the UK government is to expand the supply of privatized assets, the CPPIB, he said, and other organizations with the same orientation and capabilities, would be "willing buyers".

Currently the UK government is already working with the National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF) to create an infrastructure investment project worth £2bn.

Headquartered in Toronto, with offices in London and Hong Kong, the CPP Investment Board is governed and managed independently and at 31 December 2011, the fund totalled $152.8bn making it one of the world's biggest funds.

 

First published 16.05.2012

azeevalkink@wilmington.co.uk