Canada Pension Plan Investment Board (CPPIB) laments dearth of investments for pension funds’ ‘patient capital’; “How can we think and act long term when the world around us is caught up in this ‘myopia of the moment’?

CPPIB laments dearth of investments for pension funds’ ‘patient capital’

19 March 2013

Author: Jonathan Williams

GLOBAL – The short-termist focus of governments and investors is creating problems for pension funds to invest their “patient capital”, the head of the CAD172bn (€130bn) Canada Pension Plan Investment Board (CPPIB) has said.

Mark Wiseman, chief executive and president of CPPIB, said the focus on the short term – due to shorter election cycles, quarterly profit reports and a “revolving door” of chief executives within listed companies – was causing problems, and that there was a need for longer-term thinking.

During a speech to the Canadian Australian Chamber of Commerce in Sydney, he asked: “How can we think and act long term when the world around us is caught up in this ‘myopia of the moment’?

“All market participants – be they investors or governments – desperately need a long-term lens,” he added. “While we may discuss practical, actionable items for reform, I am convinced that, unless we first address this short-term, structural paradigm, we will fail to create a policy environment that supports fundamental and lasting change.”

He contrasted the short-term outlook with CPPIB’s ability to invest for decades, saying that, for the board, a financial quarter was closer to 25 years.

“This fact makes us a very different type of investor and creates a strong comparative advantage,” he said.

Wiseman said the funding required for large infrastructure projects demanded such a long-term outlook – and that such an approach was also needed when examining the environmental impact of property and real estate holdings.

“We fundamentally believe there are financial benefits for all investors who do the same,” he said. “For us, so-called ‘responsible investing’ is simply smart long-term investing.”

He insisted that it was “imperative” for environmental considerations to be taken into account both in public and private markets, citing CPPIB’s involvement in the Barangaroo South project – a 22-hectare development in Sydney with residential and office developments he said would be carbon neutral.

“One of Sydney’s largest real estate developments this century will enhance the wellbeing of its community,” he argued.

Wiseman added that there was “no escape” from the environment for institutional investors.

“Infrastructure and real estate are CPPIB’s two most important long-term investment targets,” he said.

“For us to ignore environmental factors when making long-term valuations would be the same as playing Russian Roulette with the pensions of 18m Canadians.”

Wiseman praised Australian policymakers for thinking longer term – for example, by publishing a 20-year infrastructure strategy – and said it was one of the reasons the fund had committed CAD6.2bn to the country, a sum that meant CPPIB was “substantially overweight” given Australia’s share of global GDP.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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