Canada Pension Plan Investment Board is “embracing disruption” and looking to cash in on emerging shifts in the global economy, such as a move towards autonomous cars and a growing, aging population.
The board benefits from a long-term investment and can look beyond any market cycle and invest based on large structural changes that will “fundamentally change how we all work and live,” said CPPIB chief executive Mark Machin in a speech to the Canadian Club in Toronto on Tuesday. “We’ve been embracing disruption, whether that disruption is technological, whether it’s demographic, or economic, or climate-change related.”
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One structural change with widespread impact is technological change, he said, including artificial intelligence, the explosion in automation, the internet of things and the rise of fintech.
“We have an obligation to analyze how these technologies will impact each sector,” he said. “How they’re going to disrupt industries, and how they’re going to impact our investments, both now and in the decades ahead.”
He pointed to CPPIB investments in California-based autonomous vehicle company Zoox, which is aiming to have a fleet of robo-taxis ready by 2020. Another investment guided by disruptive forces, he said, is in a subsidiary of payment processing company Square Inc. called Square Capital, which invests in U.S. small business loans using machine learning to analyze vast amounts of data.
Machin also cited an investment in Viking River Cruises, which has more than 60 cruise vessels on several rivers and oceans globally. ”As the North American baby boomer generation ages, and retires, they have an increasing desire to travel and see the world,” he said.
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The CPPIB also invested in ORPEA, a European provider of long-term care services with 800 facilities serving more than 82,000 people, he said.
There is also opportunity in climate change disruption and CPPIB has invested in a joint venture with Votorantim Energia in Brazil operating wind parks, Machin said. As well, the board has roughly $3 billion invested in wind and solar projects in Canada with Cordelio Power and Enbridge.
He also pointed a shift in the “economic centre of gravity” from North America and Europe to Asia, noting that roughly eight per cent of the board’s investment portfolio is in China.
CPPIB’s best known investment is in Chinese e-commerce giant Alibaba, back in 2011, said Machin. ”We did that because we saw the rising power of consumption in the middle class in China, and also this rapid adoption of mobile technology . . . It’s proved to be a terrific investment, and we continue to add to our position.”