The CPP Investment Board has purchased approximately $6 billion of bank-sponsored asset-backed commercial paper(ABCP)since mid-September.
“Current market conditions present good opportunities to purchase high-quality, bank-sponsored fixed-income securities at an attractive yield to earn risk-adjusted returns,” says a news release from the board. “The opportunity stems from confusion in the marketplace between high-quality bank-sponsored ABCP and significantly lower-quality non-bank sponsored ABCP.”
Prior to the credit crunch, the CPPIB says it had no exposure to any ABCP and it currently has no exposure to non-bank sponsored ABCP.
The board also says that its investment represents a small piece of the estimated total $124 billion Canadian ABCP market(bank-sponsored and non-bank sponsored)and a small portion of the nominal fixed-income assets in the $121.3 billion CPP fund.
Over the weekend, the pan-Canadian investors committee for third-party structured ABCP announced that it missed its deadline and needed more time to come up with a restructuring plan.
To comment on this story, email craig.sebastiano@rci.rogers.com.