CPPIB, Pacific Asset Management Launch South Korea Data Center Joint Venture

The Canada Pension Plan Investment Board has launched a joint venture with U.K.-based Pacific Asset Management to develop data centers in the Republic of Korea that are “carrier-neutral,” meaning they will allow use by multiple telecommunication carriers. The C$646.8 billion (US$472 billion) pension giant committed C$285 million to the project as an initial investment.

It is the second time the CPPIB and Pacific Asset Management—part of the Pacific Investments Group—have formed a data center-focused joint venture in South Korea. In March 2022, the tandem announced a joint venture to develop the Jukjeon Data Centre in metropolitan Seoul. At the time, the CPPIB and a Pacific Asset Management fund invested C$146.8 million in equity for project development, with the CPPIB committing C$135 million.

“The demand for data centers in Asia Pacific has been on the rise, driven by the continued need for cloud computing and the increasing global adoption of artificial intelligence,” the CPPIB’s global head of real assets and head of Europe, Max Biagosch, said in a statement. “In South Korea, businesses continue to seek high-quality digital infrastructure to support the country’s emergence as a digital technology hub.”

The CPPIB has made multiple investments in data centers since 2017, focusing mainly on the Asia-Pacific region, including investments in Australia, Hong Kong, Japan, Korea, Malaysia and Singapore. In addition to the two joint ventures with Pacific Asset Management, the pension fund signed an agreement in September with private equity firm Blackstone to acquire Australian data center operator AirTrunk Operating Pty Ltd.

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The CPPIB committed A$24 billion ($16.16 billion) for a 12% stake in the company. It also committed as much as $2.4 billion in the second quarter of fiscal 2025 in a joint venture with digital infrastructure company Equinix Inc. and Singapore sovereign wealth fund GIC. The three aim to raise more than $15 billion in capital to develop data centers in the U.S.

In 2021, the CPPIB invested C$400 million in a data center joint venture with Japanese general trading and investment firm Mitsui & Co. Ltd. to create an investment platform for data center developments in Japan.

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Tags: Canada Pension Plan Investment Board, CPPIB, data centers, Max Biagosch, Pacific Asset Management, South Korea

The funded ratio for the 100 largest defined benefit pensions in the U.S. declined to 81.2% in October from 82.8% in September, but still up sharply from 72.4% one year earlier, according to consultancy Milliman. It was the first decline in investment returns since April.

The deficit between the estimated plan assets and liabilities grew to $1.193 trillion at the end of October from $1.090 trillion at the end of September. In total, the plans reported an estimated 1.6% in investment losses during the month, with returns for each plan ranging from a 2.9% loss to a loss of 0.6%. Meanwhile, the combined asset value of the 100 plans declined to $5.156 trillion, as of the end of October, from $5.246 trillion at the end of September. The total pension liability rose to $6.349 trillion during the month from $6.336 trillion.

Five of the 100 plans fell below the 90% funded mark by the end of October, leaving 29 plans above the benchmark. At the same time, one plan fell below 60% funded during the month, raising the total number of funds under this mark to 15.

Most of the major market trackers closed lower in October, as driven by election and geopolitical headlines and mixed economic indicators, according to Nasdaq’s Market Intelligence Desk.

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Looking forward, Milliman projected what it expects the aggregate funded status for the pension funds will be a year later under three scenarios. The baseline scenario uses the assumption that each pension’s investment returns will match its assumed rate of return, a median 7% among the 100 plans. The firm also projects “optimistic” and “pessimistic” scenarios in which investment returns are 7% higher and 7% lower, respectively, than their assumed rate of return.

Under the baseline scenario, Milliman projects that the funded ratio will rise by only 1.5% in the next year, to 82.7%—a far cry from the 10.4% increase over the 12-months period that ended on October 31. Under the optimistic scenario, the pension plans’ funded ratio will increase to 88.2%, while Milliman expects the ratio to drop to 77.2% under its pessimistic scenario.

Milliman also stated that the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process decreased in October to 101.2% of a plan’s accounting liability from 101.7% the previous month and 101.1% a year earlier. Meanwhile, the average pricing buyout costs declined to 103.9% from 104.4% in September, up slightly from 103.5% in October 2023.

The firm also reported that average accounting discount rates increased 40 basis points in October, while competitive annuity purchase rates increased 46 basis points, which caused the monthly decline.