Yahoo Finance China a dilemma for asset managers juggling growth and risk, AIMCo's Siddall says
China poses a conundrum for asset managers because while it is cheap and growing, there are risks when it comes to rule of law and transparency, said Evan Siddall, chief executive of the Alberta Investment Management Corp. (AIMCo).
The $158-billion pension and endowment manager opened its first office in Asia this month, in Singapore, and Siddall spoke about AIMCo’s plans there following a speech in Toronto on Sept. 26.
“My guess is that we’ll probably position ourselves in economies around that market that can participate in the growth but don’t have some of the risks,” he said.
“If you can find opportunities to participate in the growth of consumer spending in China without actually being in China, those are attractive, depending on the price.”
Siddall noted, however, that “mis-pricing” or a mismatch between price and true value that makes an acquisition attractive, is less likely to occur in markets that do business with China and where perceived risks related to transparency and the rule of law are lower.
“Everybody wants that kind of investment,” he said. “We’re quite, like most other investors, quite reticent about China.”’
While he didn’t strictly rule out investments in China, which has been beset by a slowdown in previously red-hot growth alongside rising trade, diplomatic and military tensions with the United States, he did mention China in an example of an infrastructure investment tied to climate and then reversed course to say that such an investment would not be made by AIMCo in China.
“China is ridiculously cheap,” Siddall said. “We’re just gonna have to be very, very careful about China because there are reasons why it’s mis-priced.”
China is ridiculously cheap
Evan Siddall
AIMCo has very little invested in China and most if not all investments there were made through external fund managers, he said, noting that the entire commitment to Asia is around two per cent of the fund’s assets.
How much more will be invested in Asia now that AIMCo has a physical office there as part of a global diversification strategy hasn’t been strictly defined.
“It’s no more complicated than ‘more’ because we’ve got room to grow,” Siddall said.
After his speech, he declined to weigh in on AIMCo’s potential role managing a separate Alberta pension plan should the province elect to the withdraw from the national Canada Pension Plan. A report commissioned by the province’s previous government was made public Sept. 21 and indicated Alberta could walk away from CPP with a $334-billion asset transfer and create its own pension under different management.
“This is a political matter…. We’ll probably be asked our view and we haven’t even thought about it,” Siddall said. “We’re told under legislation by the province who we work for. If that changes, we’ll do a great job.”
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Edmonton-based AIMCo is among the last of the Maple 8 group of Canada’s largest diversified pension management organizations to open an office in Asia, and the Singapore opening came just months after some members of the group, including the Ontario Teachers’ Pension Plan Investment Board, the Caisse de dépôt et placement du Québec and British Columbia Investment Management Corp., announced pauses to private direct investments in China amid growing economic and diplomatic tensions.
The Canada Pension Plan Investment Board, which invests funds not needed to pay current CPP benefits, has the largest commitment to China among Canadian pension management organizations at nearly $52 billion or a shade over nine per cent of assets. CPP Investments officials have not announced any change to the organization’s China strategy.
• Email: bshecter@nationalpost.com
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