BUSINESS

Caisse hopes Buffett's interest in Canada will grow after investment in Suncor

08/16/2013 01:46 EDT | Updated 10/16/2013 05:12 EDT
MONTREAL - Quebec's main pension fund manager hopes Warren Buffett's investment in Suncor Energy signals a bigger interest in Canada by the renowned U.S. investor, something that could boost the share value of the companies in which it has invested.

"I hope that it triples the price . . . I hope that it quadruples the price," Caisse de depot CEO Michael Sabia said Friday regarding the disclosure by Buffett's Berkshire Hathaway that it held 17.8 million shares of the oil producer (TSX:SU), valued at more than $500 million.

At the same time, the Caisse owned 23.4 million shares worth $689.2 million, according to a U.S. regulatory filing.

Sabia said he hoped Buffett "invests in a whole bunch of other things that we're invested in and we just blow the lights out from a returns point of view."

"So I'm doing everything I can to encourage him to just take our portfolio and put a lot of money in behind it."

Sabia made the comments after the Caisse reported it earned a return of 4.5 per cent on its portfolio in the first six months of 2013, narrowly beating its benchmark reference portfolio, which grew 4.2 per cent.

The performance for the first six months of the year compared with a gain of 3.5 per cent in the same period a year ago and 3.7 per cent in the first half of 2011.

Sabia also said Friday the Caisse would consider partnering to take Blackberry private, and continues to have faith in the ability of troubled companies SNC-Lavalin (TSX:SNC) and Rona (TSX:RON) to turn things around over the long term.

Sabia said the Caisse's interest in working with partners to take Blackberry (TSX:BB) private would depend on specific conditions such as the prospective returns and structure of a deal.

"Of course we'd be open to looking at...whether we do it or not I can't tell you, I have no idea because it's not something that's on the table as we speak."

The Caisse de depot et placement du Quebec, which manages investments primarily for public and private pension and insurance plans, saw its net assets increase to $185.9 billion at the end of June, up from $176.2 billion at the end of 2012.

Over four years, the Caisse reported an average annual return of 10.5 per cent, compared with 9.1 per cent for its benchmark index.

A former top Caisse executive applauded the performance of Sabia's team this year and in generating strong average returns over four years.

"Overall, they should get an A," said Michel Nadeau, currently executive director of the Institute for Governance of Private and Public Organizations.

He said the Caisse has benefited from luck and good timing by altering its investment strategy and focusing more abroad, where the decline in the Canadian dollar has accentuated gains.

Nadeau doubted the Caisse would take a risk on BlackBerry.

"I think it will be extremely difficult to find a Canadian solution," a former No. 2 at the Caisse said in an interview.

The Caisse said the $7.8-billion increase in net investments was led by a $6.3-billion (7.7 per cent) increase in equities, a $1.7-billion gain (6.5 per cent) in inflation-sensitive investments and a $600-million (0.9 per cent) decrease in fixed income.

The Caisse said rising interest rates hurt the fixed income portfolios, but the asset class outperformed its benchmark index, which fell 1.6 per cent.

It added $1.5 billion in new investments in Quebec this year.

Sabia said the global economy is showing signs of returning to greater "normalcy" as the United States enters a more solid growth phase and the Chinese economy slows to a more sustainable long-term pace.

However, he said monetary policy that has kept interest rates at historic lows has prompted equity prices to rise as investors seek alternative investments.

A slowdown in the Chinese economy over the last 12 to 16 months has had a "meaningful impact" on Canadian markets, which declined in the first half of the year, Sabia noted.

He said the disparity in global markets forces the Caisse to be "highly selective" and "very targeted" in its investments.

Meanwhile, Sabia, a former head of BCE, declined to wade into the "very political" issue of U.S. telecommunications giant Verizon entering Canada. But he said the Caisse is a patient investor that will continue to support efforts by SNC-Lavalin and Rona, praising the management of both Montreal-based companies.

"You don't turn around companies in a matter of months," Sabia said. "The market's got to give people time to accomplish the work that they need to get done and that's why we talk all the time about the importance of long-term."