Australia Property and Infrastructure Lure Canadian Pensions

Canadian pension funds will increasingly look to Australia for long-term infrastructure and investment opportunities, according to an industry panel hosted by The Trust Company.

(June 27, 2012) — Canadian pension funds are increasingly seeking long-term infrastructure investments in Australia, according to a panel hosted by The Trust Company (TTC).

Canadian investment in Australian property and infrastructure has ballooned in recent years, with Australia now the third largest global destination for Canadian direct investment abroad (excluding tax havens), according to the TTC, a trustee company that offers services including infrastructure custody. Canadian direct investment in Australia is approximately C$25 billion, making the two-way investment between both Australia and Canada around C$45 billion.

“Canadian investors are looking for stable returns in the current low-yield environment and are showing a strong interest in Australia given its proximity to Asian markets and, in particular, China,” said Andrew Cannane, general manager of corporate clients at TTC. “On a relative risk weighting Australia is still a most attractive investment destination for investors; it is highly transparent, it has legal certainty, and a 4.3% GDP growth.”

The panel featuring Scott Farrell and Matthew Stutsel, partners at KPMG; Komu Kumar, investment director of financial services at Austrade Canada; and Andrew Cannane, general manager of corporate clients at The Trust Company, looked at opportunities presented by the wave of Canadian investment into Australian infrastructure and property.

Meanwhile, earlier this year, the Canada Pension Plan Investment Board, which manages about C$155 billion, told Bloomberg that it plans to increase its longer-dated investments in Australia to boost returns. “We would like to grow CPPIB’s presence here,” the Canadian fund’s Chief Executive Officer David Denison told the Canadian Australian Chamber of Commerce in Sydney, according to an e-mailed copy of his speech. In April, OMERS announced the start of a Global Strategic Investment Alliance (GSIA) alongside initial alliance members Pension Fund Association (PFA) and a consortium led by Mitsubishi Corporation (MC), both of Japan. 

The sentiments about Australian infrastructure and property investments also follow efforts last year among Canadian funds to form a global alliance of infrastructure investors that would help pensions further build up its portfolios. In March of last year, the Ontario Municipal Employees’ Retirement System (OMERS) proposed the alliance at a pension conference in the United Kingdom. Infrastructure – a common investment for large pension funds due to their steady cash returns – has been a staple of OMERS’ portfolio for years through its Borealis subsidiary, but is gaining momentum elsewhere as funds grow in size and are thus able to allocate more capital to these often illiquid investments.

Related article: Infrastructure—or Imprudent?

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