Canada Pension Plan Investment Board (CPPIB) is becoming increasingly selective in financing AI-related projects amid concerns over excessive valuations and complex financing arrangements, while identifying opportunities in fund finance and net-asset-value lending, according to a report by Bloomberg.
David Colla, global head of credit investments at the CAD863.6bn pension fund, warned of signs of speculative behaviour in AI financing, particularly around off-balance-sheet debt structures and interconnected investments between technology companies. AI-related investments currently represent approximately 3.5% of CPPIB’s credit portfolio.
Despite its caution over AI, CPPIB is reportedly increasing its exposure to private markets lending, including financing backed by investment fund assets. The fund recently completed two mezzanine transactions in Europe secured against loan portfolios, generating yields approximately 4% to 5% above benchmark rates.
CPPIB is also reportedly expanding into NAV lending, allowing private equity managers to borrow against existing portfolio investments rather than sell assets. Colla identified fund finance as a particularly attractive opportunity as slower exits and longer holding periods increase demand for liquidity solutions.
The pension fund’s credit portfolio returned 3.8% in the fiscal year ended March 31, with approximately 67% invested in the US. Its holdings include a majority stake in alternative credit manager Antares Capital.
