OTTAWA: Caisse de Depot et Placement du Quebec (CDPQ) last week sold its first Canadian dollar bond in a decade. Now it’s looking to establish itself as a regular issuer in the euro market.

       The C$390bil (US$315.6bil or RM1.31 trillion) pension manager wants to be able to fund wherever it’s relatively cheap, and to have investors it can rely on in different markets, said Ian Charest, the head of treasury at Canada’s second-largest pension manager.

       “Sometimes there’s substantial differential between cost of funds between regions,” Charest said in an interview. “That means we have to have relationships with investors.”

       The firm has over two thirds of its investments outside the nation, and regularly borrows in US dollars, the largest debt market in the world.

       The euro-denominated market is the second biggest, making it a strategic one for the pension fund.

       It might also look at more “tactical” bond deals in pounds sterling, Australian dollars or some of the Asian currencies, among others. Green bonds might make sense too.

       Last week it sold a five-year note, with investors outside Canada accounting for 42% of the transaction, he said.

       Having issued so much in the US might have helped the company gain more investors for a Canadian dollar offering, Charest said.

       The Canadian dollar issue “is really, for me at least, a good example of how we can reap dividends from building an international programme in the US,” said Charest.

       There were “a lot of foreign investors that allowed it actually to keep the price very effective for us.”

       CDPQ holds top credit ratings from the four largest graders and returned to its domestic bond market at a time when central banks and other managers of foreign reserves have been consistently adding Canadian dollar-denominated assets.

       “Most of the feedback we got was: we’re happy to see another AAA name up there because we want to invest the Canadian dollars,” said Charest referring to meetings with investors ahead of the issue.

       “We are committed to keeping issuing in Canada. So that doesn’t mean 10 times a year, of course, but say once a year or so, depending on market conditions.”

       CDP Financial Inc, an issuing unit of CDPQ, last sold bonds in euros in June 2010 when it sold 10-year bonds, according to Bloomberg data.

       “If we look at two to five years, I’d say we would like to see a regular presence in euros,” said Charest. That could include issuing green bonds “as soon as next year.” “We hope to be able to issue a green bond in Canada one day,” he said. “Sooner rather than later, if we can”.

       CDPQ’s new climate-change related targets disclosed on Sept 28, which include a significant increase of investment in green assets, “give us a lot of opportunity to issue green bonds,” he said.

       The pension manager wants to make its green bond programme larger before considering other types of ESG financing, though “we are very open-minded about the possibility for other type of instruments,” Charest said. — Bloomberg