Milken Institute
read bio
Institutional investors prefer equities and infrastructure
By: Milken Institute
April 30, 2012
Caretakers for both California and Canadian pensioners and the heads of some top institutional investment firms say they are not distracted by global economic pyrotechnics, and instead are looking for companies poised to grow robustly once the financial system recovers its mojo.

Mark Wiseman of the Canada Pension Plan Investment Board dismissed European sovereign bonds as bad risks with low returns when there are temptations like undervalued real estate or unearthed commodities that will offer great returns in decades to come.

"I would rather own gas pipes than a promise from Angela Merkel," Wiseman said. "We want hard assets that are essential for operations."

Joseph Dear, who leads the California Public Employees Retirement System, said he's looking for infrastructure deals because they, too, will bear fruit further down the line. The trouble, he said, is that there's a dearth of opportunities because of reluctance right now to gin up major projects. To all this future think, Xi-Qing Gao, who heads up the China Investment Corp., merely shrugged and quoted his boss: "I'd love to be thinking long term, but (if I did) in three years, IaEUR(TM)d be fired."

Gao said there are few things Chinese media is allowed to really dig into. The one arena journalists can explore is the economy, and they do it with zeal. If it's discovered that managers have made a poor bet, there are repercussions. "We can invest in anything, but it has to perform." And the Chinese public has grown to expect rapid growth and high yields. If managers fall short of that, they pay. So, what's left?

"My mandate is to maximize returns on our hard-earned foreign currency,aEUR? Gao deadpanned as the audience laughed.

Gao says things will change as more financial professionals and fewer bureaucrats control investments. And that, he said, means hiring foreigners and paying dearly for them. That practice, too, has drawn criticism at home.

When the moderator asked the panelists what they would do with the $30 trillion that investors have on the sidelines, nearly all of them said they felt the pull of battered equities of solid companies in the U.S. and emerging markets.

Full video is available here.