CPPIB CEO Mark Machin speaks in Calgary on March 8, 2020.
Randy Risling/The Globe and Mail
The head of the Canada Pension Plan Investment Board says cash-strapped governments around the world should put airports, toll roads, utilities and other infrastructure up for sale to ease their current financial pains.
“There’s so much capital chasing private assets that if governments want to raise money, they’ll get incredible prices for infrastructure assets – operating and revenue-producing infrastructure assets – wherever you are in the world,” chief executive officer Mark Machin said Thursday in a meeting with Globe and Mail editors and reporters. “Just a ton of capital will go for it.”
Mr. Machin’s view, of course, is not a disinterested one: The CPPIB is one of the world’s biggest investors in private assets, such as infrastructure and real estate. At Sept. 30, the CPPIB had $37-billion invested globally in infrastructure, plus another $60-billion in real estate and energy assets.
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There is room for more. “We’d be delighted to compete for it,” Mr. Machin said – even as he conceded the competition makes that more difficult.
As interests rates have fallen, stayed low and then fallen again, all sorts of investors have piled into private assets, seeking better returns. Increasingly, Mr. Machin says, infrastructure is replacing fixed income or bonds in some portfolios because it has some similar characteristics, such as long-term income generation with less volatility than some other investments.
“It’s causing this enormous amount of money around the world to go to all of these areas,” he said. “And it makes it hard to find opportunities that offer sufficient returns for us.”
The CPPIB reported its results for the quarter ended Sept. 30 earlier this week, reporting a 5-per-cent return in the three-month period. While publicly traded stocks are the largest component of the portfolio, they make up less than one-third of the total pie. The CPPIB’s heavy reliance on private assets means it can outperform the stock market when it drops sharply, as it did in the March 31 quarter, but also means it lags considerably when equities zoom, as they did in the three months ended June 30.
Mr. Machin said that the CPPIB wasn’t heavily invested in certain areas that have borne a particular brunt of the COVID-19 economic decline. The pension fund’s real estate group has never cared for hotels or casinos, he said, and the fund also hasn’t invested much in movie theatres or airlines. While CPPIB loves airports, it keeps getting outbid for them by other institutional investors.
But the CPPIB is invested in theme parks and cruise lines, and earlier this month said it and partner TPG Capital LP put an additional US$500-million into Swiss-based Viking Cruises Ltd., whose business model targets retired customers. People will take cruises again, Mr. Machin says, and Viking will be a survivor.
While there’s a positive outlook reflected in that particular decision, Mr. Machin says the CPPIB doesn’t have an overarching optimism across all its investment calls, and it remains cautious about what happens next.
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“We don’t expect the global economy to be back up at pre-COVID levels until late 2022,” Mr. Machin said. “So there’s a long recovery here. And when we’re stress-testing individual companies, we’re not predicting a rosy outlook. There’s going to be troubled times through to 2022 and potentially beyond.”
During COVID, the CPPIB has benefited from investments in data centres, logistics and e-commerce – “a move to digital has been accelerated by five to 10 years,” he says.
And, “we will invest in things that are part of the rebuilding of economies. So things like the greening of the economy, continued investments in renewable energy. I think people want to build back better, as is the tagline right now.”
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
