This randomized, double-blind, placebo-controlled study will evaluate the potential of aleglitazar to reduce the risk of end stage renal disease and cardiovascular mortality in patients with type 2 diabetes mellitus and chronic kidney disease. Patients will be randomized to receive oral daily doses of aleglitazar or matching placebo. The anticipated time on study treatment is approximately 3 years.

Inclusion Criteria:

• Adult patients >= 18 years of age at screening
• Diagnosis of diabetes mellitus Type 2
• Glycosylated hemoglobin A1C (HbA1C) < 10% at screening
• Estimated glomerular filtration rate (eGFR) >=30 and < 60 mL/min/1.73 m2
• Urinary albumin-to-creatinine ratio (UACR) >=500 and < 5000 mg/g
• Treatment with either angiotensin converting enzyme inhibitor or angiotensin II receptor blocker for at least three months prior to screening
• Women of child-bearing potential using a highly effective birth control method must be willing to use the same method of contraception during the entire course of the study

Exclusion Criteria:

• Treatment with a PPARgamma agonist and/or PPARalpha agonist in the last 12 weeks screening
• Prior intolerance to a TDZ or fibrate
• Previous participation in a trial with aleglitazar
• Diagnosis or history of other types of diabetes
• Diagnosis or history of acute metabolic diabetic complications within the past 6 months
• Known primary glomerulonephritis, secondary glomerulonephritis other than diabetic nephropathy or polycystic kidney disease
• Diagnosed acute kidney injury or dialysis within 12 weeks prior to screening
• Poorly controlled hypertension (systolic blood pressure > 160 mmHg and/or diastolic blood pressure > 100 mmHg at baseline)
• Known secondary hypertension due to renal artery stenosis, primary aldosteronism, or pheochromocytoma
• History of myocardial infarction or stroke in the past 12 weeks prior to screening
• Symptomatic congestive heart failure NYHA class II-IV at baseline or heart failure leading to hospitalization within the 12 months prior to screening
• Diagnosed and/or treated malignancy (except for treated cases of basal cell skin cancer, in situ carcinoma of the cervix, or in situ prostate cancer) within the past 5 years
• Inadequate liver and hematological function
• Chronic treatment with immunosuppressive therapy
• Women who are pregnant, intending to become pregnant during the study period, currently lactating females, or women of child-bearing potential not using highly effective birth control methods