Canada’s largest pension fund is investing $450m (€396m) in oil and natural gas royalties through the acquisition of a majority stake in a US-based minerals company.

The Canada Pension Plan Investment Board (CPPIB) said its wholly owned credit investment subsidiary would deploy the initial investment in LongPoint Minerals over the next three years.

As a result, CPPIB has acquired a “significant” majority stake in the company, which has interest in royalties in 48 US states.

In a statement, the CAD279bn (€191.8bn) fund said its exploitation would initially focus on the Mid-Continent Basin spanning six US states, the Permian Basin in New Mexico, and Denver-Julesburg Basin in LongPoint’s home state of Colorado.

Commenting on the deal, Adam Vigna, managing director and head of principal credit investments at CPPIB said the multi-year commitment marked an “attractive” entry into the royalty sector.

“In owning royalty interests,” Vigna said, “we are able to participate in production revenues without the burden of associated capital or operating costs.”

He added: “We’ve partnered with LongPoint given management’s deep knowledge of these basin areas and successful proven track record spanning over 30 years of collective expertise.”

CPPIB Credit Investments, has invested CAD30bn in credit markets on behalf of the fund, and also overseas its real estate debt activities.

It recently participated in a €180m Romanian asset-backed bond, with properties owned by Globalworth Real Estate Investments.

In March, it also revealed it was supporting the €3.7bn acquisition of LeasePlan, by a consortium of institutional investors including ATP and PGGM, with a €480m loan.

For more on energy sector investments, see a recent special report in IPE

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