The Canada Pension Plan Investment Board: October 2012
Autor: chenxl93 • March 18, 2018 • Case Study • 280 Words (2 Pages) • 539 Views
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“The Canada Pension Plan Investment Board: October 2012”
The case, The Canada Pension Plan Investment Board: October 2012, introduces the history of the CPPIB, its investment strategy, its private investment department, its culture, its compensation structure and its challenges in the near future. CPPIB established one of the 10 largest pension pools with value-added investment strategy. However, challenges would appear as CPPIB grew and the macro-environment changed.
CPPIB was established in 1997 to avoid sharp fall of coverage ratio of CPP. Its long-term object is to achieve the best long-term risk-weighted returns despite government policy objectives.
The investment strategies changed to positive approaches in 2005. CPPIB actively invested to improve on Reference Portfolio benchmark through “better beta” and “enhanced alpha” approaches without intermediaries. The detailed execution of the strategies involved the coordination of three departments and the active investment would be made only if risk/return profile exceeds that on the passive holdings which would be sold to make the investment.
The Private investment Department of CPPIB consists of four primary investment groups: Funds & Secondaries, which focused on private equity fund primary investing and secondary acquisition; Principal Investing, which adopted co-investment and co-sponsorship strategies to do deals; Infrastructure, which mainly directly invested in large, monopolistic businesses with low substitution risk; Private Debt, which enjoyed flexibility in timing and directly invested in North America and Europe, with a growing focus on Asia as well.
In order to maintain a transparent and consistent culture, CPPIB should construct attractive compensation to introduce and retain the talented employees.
At last, CPPIB concerned whether previous strategies will work when it becomes larger while market goes into a prolonged slump and actions are needed to respond to those challenges.
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