Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund manager, is teaming up with Dubai-based DP World to create a C$5bn ($3.8bn) venture that will invest in ports around the world, including regions such as Asia and Latin America.
DP World, which operates ports from China to South America, will own 55% of the unnamed venture, with the Montreal-based Caisse controlling the remainder, according to a statement issued on Friday. The Caisse will begin by buying a 45% stake in two of DP World’s Canadian container terminals in Vancouver and Prince Rupert, British Columbia for C$865mn.
Michael Sabia, Caisse’s chief executive officer, said the Dubai-based firm is a world-class port operator that will give his fund better access to potential transactions and drive higher returns. “We do believe that value over the medium-to-longer term gets created through excellent operations not through financial engineering and therefore we like to invest with really good operating partners,” Sabia said in an interview on Friday. “They have certainly established themselves as that.”
Infrastructure is an asset class the Caisse has been targeting for years, amid expectations that future returns will exceed those of publicly traded stocks and bonds. The Caisse, which manages the public pension fund in the province of Quebec, counts a 27% stake in Australia’s Port of Brisbane in its infrastructure portfolio.
The Caisse will try to build a portfolio of ports that includes some that operate like a utility, with steady cash flows, and others where there is a strong growth trajectory in volumes and revenue and therefore operating earnings, Sabia said.
“We’re interested in building a portfolio in ports that accomplishes both of those things.” he said.
The Caisse is not the only Canadian pension fund seeing the opportunities in ports. Earlier this year, Canada Pension Plan Investment Board was part of a group that acquired Australian port and rail operator Asciano Ltd for A$9bn ($6.7bn). Ontario Municipal Employees Retirement System also agreed, with partners, to buy a 50-year lease to operate the Port of Melbourne, Australia’s busiest port, for A$9.7bn.