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January 22, 2020 | CPP CEO Sounds Alarm on Illiquid Assets

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

A decade of record-low interest rates has herded capital globally into the same buffet of risky assets. Most of the participants have little cash and many are highly levered. This is a time-tested recipe for forced selling and capital implosion. It won’t be different this time.  Unlike individuals, the Canada Pension Fund has the luxury of a 40-year+ time horizon and regular inflows monthly, so they run with a fully invested mandate.  But as they experienced in 2008, that doesn’t protect CPP from the forced-selling carnage of others around them.  CEO Machin discusses liquidity risks in this clip from Davos.

“I do ring the alarm bell on not to be too invested in illiquid assets,” Mark Machin, chief executive officer of the Canada Pension Plan Investment Board, said in a Bloomberg Television interview Monday at the World Economic Forum in Davos. “We are very comfortable with our risk models and what we would do in various lurches down in markets, but I do worry about the expansion of a lot of funds like us around the world into private illiquid assets.”  Here is a direct video link.

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January 22nd, 2020

Posted In: Juggling Dynamite

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