As GE Retools, a $230 Billion Fund Eyes Broader Ties

Bloomberg

Canada’s No. 2 pension-fund manager is eyeing a broader partnership with General Electric Co. as the beleaguered U.S. manufacturer rethinks its business.

Caisse de Depot et Placement du Quebec is already teaming with GE on a $2 billion aircraft-leasing platform. The duo also partnered on the purchase of a U.S. natural-gas pipeline system in 2015.

 

Now the pension-fund manager is open to playing a “constructive role” as GE overhauls its portfolio, said Caisse Chief Executive Officer Michael Sabia. At GE, CEO John Flannery is cutting costs, selling assets and reshaping operations in a bid to pull GE out of one of the worst slumps in its 126-year history.“We are doing a number of things with them and we think they are a very good partner,” Sabia said in a telephone interview March 2. “John Flannery is working hard on shaping that company for the future. There’s an ongoing dialogue between us and them, and we will see where this leads us.”

The Caisse, with C$298.5 billion ($230 billion) in assets at the end of 2017, is repositioning its fixed-income holdings by reducing exposure to the traditional bond market and increasing activities such as providing corporate and sovereign credit. Its C$50.6 billion credit portfolio, created last year, seeks to earn higher returns than bonds by investing in activities such as project financing.

Sabia offered few specifics on what new roles the pension-fund manager would consider with GE. But he said he would welcome additional investments in its partnership with GECAS, the aircraft-leasing business of the Boston-based maker of jet engines, gas turbines, oilfield drilling equipment and locomotives.

“We’re quite bullish on that platform and very bullish on working with GECAS,” Sabia said. “We’ve already deployed the first tranches of capital, and we’re looking to do more. That’s a platform that we want to fund as aggressively as we can.”

A spokesman for GECAS didn’t immediately return a call seeking comment.

Any further cash injection would probably be at least several months away, since the initial funds haven’t been totally drawn down, Sabia said. He declined to provide returns since the creation of the venture, saying that the fund manager is pleased with the amount of cash the investment has been generating.

Based in Montreal, the Caisse manages the pension plan of retirees in Quebec, as well as various provincial insurance plans.

“The reason why we like this venture with GECAS so much is that they are so good at asset deployment that the downtime on aircraft is very small,” Sabia said. “That dramatically reduces the level of financial risk to us.”

 

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