Mumbai: For Canada Pension Plan Investment Board (CPPIB), which manages one of the world’s largest pension funds, India is an important investment destination. CPPIB, which began investing in India in 2009, has pumped in about Canadian $8.2 billion in the country. Alain Carrier, senior managing director and head of international, head of Europe, CPPIB; and Vikram Gandhi, a senior adviser, in an interview, spoke on the good and bad of the India story, new investment opportunities and the country’s importance for the pension fund. Edited excerpts:
How important is India in the overall scheme of things for CPPIB? What changes have you seen since you made your first investment here with L&T?
Carrier: We think India is going to be a great long-term destination for capital. We have about C$8.2 billion in India today, about 2% of our global fund exposure, but we think the growth trajectory of India, as a proportion of our fund and as a growing pool of capital, will only increase. Our target is that emerging markets should account for one-third of the fund, between now and 2025. That’s very significant in dollar terms, and India will play a big part. For us, emerging markets is very focused—it means China, India, a few countries in South East Asia and a few countries in Latin America.
What if you do a SWOT analysis of the positives and negatives in India?
Gandhi: What has changed in the last couple of years is that the per-capita income of the Indian consumer is about $2,000 now. Analysis suggests that when a country reaches that stage, there is exponential growth. So, while there has been growth, given this inflection point, we expect it to grow even more. Second, the access of data and the proliferation of mobile technology is a big plus. What we haven’t seen is the result of regulatory changes. GST and IBC will result in a more efficient economy, but we haven’t seen those because they will take time. The challenge is that there is a lot of friction with ease of doing business. And, while there is a big aspiration to change that, on a day-to-day basis, it is (still) a big impediment.
What kind of deals will you do in India?
Gandhi: First is to find the right partner. Having a strategy with the right partners is important. We don’t just go into the market. Second is on valuations. We are sophisticated institutional investors and are careful about risks and returns. We can do a lot more in the areas we are already in--private equity, infrastructure and real estate. We are developing a strategy around private debt.
Carrier: We’ll take primary positions in companies, secondary positions in markets and look at vehicles to invest on our behalf. We’ll look at tailored market opportunities.
Will you stick to infrastructure and traditional assets, or also invest in tech companies?
Carrier: We look to invest across the entire risk spectrum. There wasn’t a rethink because we cover every single asset class. We think diversification is a great way to generate alpha and manage risk at the same time. We invested in Skype years ago, when it could be argued that the volatility of the outcome was far higher. So, there is room to invest in companies that we think have very high growth profile.
How is CPPIB differentiating itself in India from other pension funds or sovereigns, with whom you compete?
Carrier: Having capital is not enough. You need to bring focus, a good team, the partnership angle is important. Having capital is becoming less and less of a differentiator. It’s hard work, but being sophisticated, having teams on the ground, what we bring to the table is expertise across a number of different asset classes, and the ability to be a partner for a very long term. We have to essentially convince partners that for their specific need and opportunity we are the best partners around. And, for some of our partners globally, I think, we have managed to do that.