China a dilemma for asset managers juggling growth and risk, AIMCo's Siddall says

financialpost.com:

China poses a conundrum for asset managers because while it is cheap and growing, there are risks when it comes to rule of law and transparency, said Evan Siddall, chief executive of the Alberta Investment Management Corp. (AIMCo).

The $158-billion pension and endowment manager opened its first office in Asia this month, in Singapore, and Siddall spoke about AIMCo’s plans there following a speech in Toronto on Sept. 26.

“My guess is that we’ll probably position ourselves in economies around that market that can participate in the growth but don’t have some of the risks,” he said.

“If you can find opportunities to participate in the growth of consumer spending in China without actually being in China, those are attractive, depending on the price.”

Siddall noted, however, that “mis-pricing” or a mismatch between price and true value that makes an acquisition attractive, is less likely to occur in markets that do business with China and where perceived risks related to transparency and the rule of law are lower.

“Everybody wants that kind of investment,” he said. “We’re quite, like most other investors, quite reticent about China.”’

While he didn’t strictly rule out investments in China, which has been beset by a slowdown in previously red-hot growth alongside rising trade, diplomatic and military tensions with the United States, he did mention China in an example of an infrastructure investment tied to climate and then reversed course to say that such an investment would not be made by AIMCo in China. 

“China is ridiculously cheap,” Siddall said. “We’re just gonna have to be very, very careful about China because there are reasons why it’s mis-priced.”

China is ridiculously cheap

AIMCo has very little invested in China and