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CPP commits $380m to infrastructure

The Canada Pension Plan Investment Board has pledged $380m, including co-investments, to European infrastructure funds managed by the Australian financial services firm The Macquarie Group.

The CPP Investment Board announced the commitment of C$470 million (US$380 million; €291 million) to the Macquarie European Infrastructure Fund, including the board’s first co-investment into infrastructure assets.

The commitments consist of a €200 million (US$260 million) limited partnership investment in the Macquarie European Infrastructure Fund and a £66 million (US$120 million) co-investment alongside the fund’s acquisition of the UK-based Wales & West gas distribution network. The acquisition is expected to close in the second quarter of 2005.

The Macquarie European Infrastructure Fund is reportedly seeking to raise total commitments between €500 million and €1 billion with a final closing expected in March 2005. In April 2004, the fund held a first close on €422 million with commitments from Stichting Pensioenfonds ABP of the Netherlands, Norwegian pension plan Oslo Pensjonsforsikring, Italian insurance company Generali, France's Dexia Credit Local and Canada's Caisse de depot. The fund has already made two investments:  the acquisition of a 50.1 percent interest in UK utility South East Water and the purchase of Arlanda Express, a high speed rail link between Stockholm and Arlanda Airport.

In a press release, David Denison, president and chief executive officer of the CPP Investment Board, stated, “Infrastructure, which is a relatively new asset class for us, has higher expected returns than bonds and is a good hedge against inflation. This is the type of regulated asset we are ideally looking for and are disappointed that there are so few domestic opportunities that meet our investment criteria.”

Last year, CPP began to implement its infrastructure investment strategy, committing C$200 million to Macquarie Essential Assets Partnership, which focuses on assets in Canada and the United States. The investment board has allocated up to 10 percent of the CPP reserve fund to infrastructure assets.

The CPP Investment Board is the financial manager of funds not required by the Canada Pension Plan to pay current pensions. As of September 30, 2004, the value of the Canada Pension Plan was C$75.2 billion with C$44.2 billion managed by the CPP Investment Board. In addition to its infrastructure commitments, the board has also allocated up to 10 percent of the reserve fund to investments in private equity and an additional 10 percent to real estate.