CPPIB seeks to boost dealmaking in firms it owns

Canada’s US330 billion national pension fund will allocate more money to fuel deals by companies it owns in search of higher returns, said its top executive.

Mark Machin, chief executive officer of the Canada Pension Plan Investment Board, said the strategy is part of the fund’s effort to generate alpha, or above-market returns, after a strong rebound in equities since late March.

“We’re going to be increasingly focused on what we call portfolio value creation -- working with the companies that we have, increasing the interventions that we make, increasing the capital that we allocate to M&A-type activities with those companies,” Machin said in an interview Friday on Bloomberg Television. “That’s where a lot of value’s going to come, rather than from just multiple expansion.”

The fund had $105.6 billion (US$80 billion) in private equity assets as of June 30, including companies such as Petco Animal Supplies Inc. CPPIB and its partners are exploring a sale or initial public offering that could value that retail chain at US$6 billion, Bloomberg reported this week.

CPPIB hasn’t changed its long-term portfolio construction as a result of the COVID-19 pandemic and recession, Machin said. But the fund is still “wrestling with” the effect of ultra-low interest rates, he added, and with the resulting competition for infrastructure and other assets that can generate yields.

“Nothing is not competed and not competed heavily,” he said. “It takes effort to find good opportunities.”