Canada Pension Plan Investment Board Chief Executive Officer Mark Machin is sending his team scouring the globe in search of reasonably-priced assets, as both equities and alternative investments have soared in value amid the low interest rate environment. In an interview on BNN, Machin said the nation’s largest pension fund has gotten creative in its search for assets in a bid to avoid lofty entry prices.

“It’s challenging, because markets have run up everywhere, everything is relatively expensive, it’s difficult for anybody to find really terrific opportunities,” he said. “We find opportunities in places where you have to look quite hard, and it’s sometimes in areas where it may not be obviously popular.”

Machin said his team has identified shopping malls as an attractive place to put money to work, deeming the larger locations undervalued due to outsized bets e-commerce will completely erode the bricks and mortar shopping landscape.

“People are cautious of [shopping malls] over the rise of e-commerce, and they’re right to be cautious because if you’re in a small mall in not a great location, those businesses are getting killed,” he said “But the mega malls, the destination malls, are actually doing remarkably well.”

Machin said the double-whammy of a rapidly-aging population more reliant on the pension fund and the negative impact of a sustained period of low rates on fixed-income investments is driving the pension fund’s investment decisions.

“Lower returns on the fixed-income portion of our portfolio is a challenge, and therefore we have to find other ways to make returns,” he said. “A lot of what we invest in is the equity side of the equation, so we’re much more exposed to public equities, private equities, and their returns have been relatively good for the last several years.”

Machin said the pension’s chief actuary said the fund (which totaled $300.5 billion as of the end of September) will remain self-sustaining for the next 75 years, assuming a 3.9 per cent annualized return -- but he’s aiming much higher.

“Our goal is to maximize returns for the pensioners without undue risk of loss, so our goal is to make much bigger returns," he said. “We have a risk appetite which we have been modestly adjusting over the last three years, and that’s really just a stage of maturity of our organization, rather than a call on markets. We are able to take a little bit more risk than more mature funds.”

But Machin underscored that the pension fund will demand adequate returns for the risk profile of the assets its will to take on.

“We’ve modified our risk appetite a little bit, but we’re very, very careful: every single investment we make, we try to thoroughly understand every single aspect of risk and ensure we’re pricing it accurately and we’re getting adequate return for it.”

“We want to be fully compensated for all the risk we take.”