John Graham, CEO and president of CPP Investments, doesn’t feel uneasy about investing amid a geopolitical conflict coupled with rising inflation and interest rates in the developed world. At the head of a Canadian investment manager with more than $550 billion in assets under management worldwide, the executive believes that in times like these markets favor long-term investors.

“The best time to invest is when there is fear in the market. The way I think about investments is from the bottom up, from company to company and sector to sector,” Mr. Graham said. In the first half of last year, despite all the concerns brought by the pandemic, CPP took part in several fundraising rounds of Brazilian companies, including Nubank and Iguá, a basic sanitation company.

The best way to protect capital in the face of unchecked inflation around the world is a diversified portfolio, Mr. Graham said. CPP achieves that by having 85% of its portfolio abroad. That amount is divided into real assets, equity stakes and other projects around the world. “I am very grateful that we have built a global footprint, because it helped us a lot during the pandemic,” he said.

The executive believes that real assets such as real estate and infrastructure are naturally protected against inflation. This investment class is precisely the most important for the group in Latin America. The region accounts for 10.1% of CPP’s real assets, 1.2% of investments in private equity, and 8.3% of credit. CPP has $26.2 billion invested in Latin America.

With a strong focus on sustainability-related investments, CPP is one of the controlling shareholders of power generation company Auren in Brazil, together with Grupo Votorantim. One of Auren’s main assets is a hydroelectric power plant, Porto Primavera, which also boasts a renewable power complex that includes solar and wind power generation.

Tania Chocolat, managing director of CPPIB in Brazil, still sees several opportunities in infrastructure in the country and said that the fund is aware of them. “We have achieved greater regulatory stability and today we are in a better position than 25 years ago. There is still a lot of room for investments in sewage systems, for example. It is a way of supporting the country considering the substantial infrastructure bottlenecks we have.”

Mr. Graham recalled that sustainability is much more than just investing in renewable power. “We believe that the global economy will try its best to make a transition to carbon neutrality by 2050. And many calculations are made about whether this will cost $60 trillion or $70 trillion. Either way it’s a big figure, and this economic transition will require patient, long-term capital and partnerships,” he said.

CPP’s portfolio is expected to grow to $1.7 trillion by 2040. The firm’s annualized rate of return is 11.6% for the past 10 years.

John Graham revealed that one of his goals is to have a larger stake in emerging markets in the next five years. “In five or six years, we envision continuing to invest in emerging markets and we expect the percentage in those markets to continue to increase because the importance of emerging countries in global GDP will grow.”

Mr. Graham also said that he sees sustainability and technology as the two main trends of the future. “All companies need to think about what the role of technology is in their industry.”

CPP has expanded its exposure to growth companies, especially startups. “We opened an office in San Francisco to be closer to the U.S. technology industry,” he said.

Source: Valor International

https://valorinternational.globo.com