Good news for emerging markets! The Canadian pension fund board intended to invest its funds in emerging markets in the upcoming years.
The state-owned Canada Pension Plan Investment Board (CPPIB) announced that they are eyeing to invest one-third of their funds in emerging markets in the succeeding years. And CPPIB is looking into investing more of its funds in India.
CPPIB Asia Pacific head Suyi Kim said that the board plans to put a third of its funds in emerging markets until 2025. Kim mentioned that India would be the foremost destination for the pension fund’s investment.
Besides India, CPPIB is also looking into putting their funds for investment options in Australia, South Korea, Japan, and China. The investment will significantly help these markets to speed up their recovery from the adverse economic impact of COVID-19.
As of June 2020, the board oversees the massive Canadian pension fund worth $329.75 billion or 434.4 billion Canadian dollars. Currently, the majority of its investments are in North America then followed by Asia. About 34% of the pension fund’s total assets are invested in the United States.
More Investments Heading to India
CPPIB said that a critical destination of their investment would be India. Right now, the Canadian pension fund has bought 18.4 million shares in Kotak Mahindra Bank. It also put a $225 million investment in the India Resurgence Fund. The fund is a platform that buys out distressed assets in India.
Late last year, CPPIB had a pact with India’s National Investment and Infrastructure Fund (NIIF) to invest $600 million in the South Asian country. Part of the agreement is committing $150 million for the NIIF’s Master Fund and another $450 million as co-investor in future opportunities.
Kim noted that CPPIB’s investment ventures in India include real estate, private and public equities, infrastructure, credit, and co-investments. Kim added that the increasing demand for building infrastructure and domestic consumption and technology are significant considerations to invest in India.
However, India was greatly affected by the pandemic, especially the banking sector. Before COVID-19, the financial industry was already suffering from its non-performing assets. It continued to deteriorate as the pandemic swept the country. Financial experts predicted that it might take years to recover, and it might only return to pre-pandemic levels after 2023.
A third of the massive Canadian pension fund will find its way to investment opportunities in emerging markets. Canada is particularly interested in making more investments in India in the next five years. However, the most emerging markets like India are still reeling from the impact of COVID-19, and any investment might take longer to materialize.