The president and chief executive officer of the Canada Pension Plan Investment Board (CPPIB) has argued for the importance of a long-term approach when investing in such assets as real estate, private equity and infrastructure.
In an address to the Canadian Australian Chamber of Commerce yesterday, Mark Wiseman noted an over-abundance of short-term thinking in today’s current investment culture and stressed the importance of long-term thinking and long-term investors to the global economy and society. “Long-term investments in assets such as infrastructure or commitments of patient capital to fuel product development have a direct impact on job creation, innovation, productivity, long-term GDP growth and the environment,” said Wiseman. “These returns benefit society as a whole.”
Wiseman included real estate as one of the assets in which institutions should engage in such a long-term approach. As an example, he cited a joint venture with AMP Capital, whereby the two entities acquired a $436 million equity stake in two prime Australian shopping centres: the Macquarie Center in Sydney and the Pacific Fair Shopping Centre on the Gold Coast.
“These real estate investments are a perfect fit with CPPIB’s long-term investment strategy,” Wiseman said. “With the pension plan worth close to C$173 billion (€130.8 billion, $168.4 billion) as of December 31 and slated to grow to close to a half-trillion dollars by 2031, we also are one of only a handful of global investors who can make investments of this size.”
Wiseman noted that CPPIB has realized $3.3 billion in value-added returns above and beyond that of the CPP Reference Portfolio, its performance benchmark, since it started active management in 2006. “These returns are net of all costs and evidence of the significant value our investments in long-term asset classes like private equity, real estate and infrastructure deliver during periods of short-term volatility,” he said, adding that he expects this value-added figure “to only increase as we also realize the long-term gains of such assets.”
Wiseman discussed the dramatic need for governments worldwide to attract such long-term capital and pointed to the ability and interest of institutional investors like CPPIB to fill this crucial role. “As institutions, we need solid, long-term opportunities in both our home countries and abroad to match long-term liabilities,” he said. “We need to invest in countries, companies and assets that will generate sustainable value over the long term.”
Wiseman urged business and government to foster a strong global market for long-term capital, but he recognized that building one will be no easy task. “We live, think and act in a short-term paradigm,” he said.
To begin to better support long-term value creation, Wiseman listed three central issues he sees as necessary to address: a counter-balance to the short-term forces in public markets; frameworks to support responsible investing; and the need for governments to focus on longer-term thinking. “At CPPIB, we firmly believe that investors must look beyond market volatility, rise above the status of mere spectators and focus on business fundamentals,” he added.
For Wiseman’s full remarks, click here.