CPP Investment Board eyes hedge fund strategies

(June 13, 2003) In another sign that distressed markets are pushing alternative investments into the mainstream, the manager of Canada’s public pension system is putting out a tender for hedge fund managers to add value to its portfolio of 2,000 stocks.

The CPP Investment Board (CPPIB) manages a $17.5 billion portfolio that includes global stocks, private equity and real estate. The board is seeking active managers initially to devise long/short overlay for the CPPIB’s existing passive stock portfolio. The CPPIB lost 21% on its equity holdings last year. Its $38 billion bond portfolio earned 8.4%.

In a news release, the board says it “will retain the responsibility of managing the desired market risk exposure (beta)” while “the selected managers will be responsible for creating value by taking active positions on different securities (alpha) by selling less attractive stocks from the CPPIB’s passive holdings of almost 2,000 stocks and buying more attractive stocks (or sector baskets, country baskets, currencies, etc.).”

The board calls this a “long/’synthetic short’ approach.” Firms interested in replying to the request for proposal are expected, among other things, to have “long/short expertise in global and Canadian equities, excellent risk management practices and controls” and a well-articulated investment process.”

The board plans to look at other active managers in 2004, specifically active hedge fund, fixed income and developing market managers.

Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

(06/13/03)