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CPPIB Commits $330 Million to Canadian Private Equity

The Canada Pension Plan Investment Board (CPPIB) is putting an additional $330 million into a fund managed by NorthLeaf Capital Partners that invests in the Canadian private equity market.

The move is the latest in a series of commitments to Northleaf funds and Canadian private equity.

From a CPPIB press release:

This investment is in addition to CPPIB’s $70 million commitment in 2014 to the Northleaf Venture Catalyst Fund. Since 2005, CPPIB has committed $1.2 billion to Canadian private equity investments through its partnership with Northleaf.

The investment objective of this additional mandate is to focus on Canadian small and mid-market buyout and growth equity funds that are seeking to raise $1 billion or less in capital commitments.

CPPIB is one of the largest and most active investors in Canadian private equity and venture capital with approximately $4.1 billion in commitments to Canadian fund managers and an active direct private equity investment strategy for the Canadian market.

“By expanding our successful Canadian fund-of-funds program, CPPIB can effectively access the Canadian private equity market,” said Jim Fasano, Managing Director, Head of Funds, Secondaries & Co-Investments, CPPIB. “We remain confident in Northleaf’s capabilities, expertise and proven track record in continuing to manage this program.”

“We look forward to continuing our longstanding partnership with CPPIB in managing this additional mandate for the Canadian private equity market, and building a focused portfolio of top-tier Canadian mid-market funds,” said Jeff Pentland, Managing Director, Northleaf Capital Partners. “We are proud to have supported CPPIB in advancing their program since 2005, and we value and appreciate CPPIB’s continued confidence in our team, track record and investment process.”

The CPPIB managed $201.1 billion in assets as of March 31, 2014.

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Preqin: Hedge Funds Grew More Than Any Alternative in 2014

Hedge funds experienced the most asset growth of any alternative asset class in 2014, according to a Preqin report.

Despite scrutiny over low returns and high expenses, investors put more money into hedge funds in 2014 than private equity, infrastructure or venture capital.

Japan Pension Begins Search For New Money Managers

The end of 2014 was a busy period for Japan’s Government Pension Investment Fund (GPIF). The fund overhauled its asset allocation and will be putting 50 percent of its assets in equities while cutting its bond holdings.

In a related move, the fund will be looking for a new crop of money managers to handle investment duties, and the GPIF is willing to shell out more money for better talent.

Businessweek reports that the GPIF could begin recruiting managers officially next month. From Businessweek:

Japan’s Government Pension Investment Fund may use a private seminar next month to inform potential job applicants as part of its efforts to recruit professional money managers to the world’s largest investor of retirement savings.

Yasuhiro Yonezawa, chairman of the investment committee at the $1.1 trillion fund, is expected to discuss GPIF’s reforms and the qualifications it wants from future staff, said Nobukiyo Akiyama, an executive at Kotora Co., a Japanese executive search firm that’s organizing the Feb. 13 event.

GPIF is seeking to hire experienced investors as it shifts to riskier assets from bonds in anticipation of faster inflation under Prime Minister Shinzo Abe. Hiromichi Mizuno, a former partner of London-based private-equity firm Coller Capital Ltd., became its first chief investment officer this month.

“The fund will have to obtain professionals that have know-how and skills for private equity, venture capital and real-estate investments following the reform, besides back-office staff,” Akiyama, manager of the chief executive officer’s office at the Tokyo-based executive search firm, said in an interview yesterday. “That’s a very specialized area.”

Kotora, which has 20,000 job seekers registered with the firm, plans to invite 80 individual and corporate clients from the asset-management industry to the seminar, which will be held in Tokyo, Akiyama said.

[…]

The pension fund won flexibility last year to pay higher salaries to attract investment staff instead of government officials.

The GPIF plans to hire about 40 new managers, according to Businessweek.

The fund manages $1.1 trillion in assets and is the largest pension fund in the world.

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Preqin: More Pensions Invested in Private Equity, But Average Allocation Down From 2013

Data from Preqin shed some light on private equity activity in 2014, and showed that more public pension funds invested in private equity in 2014.

Even still, public pensions’ average allocation to private equity has dipped slightly since 2013.

From ThinkAdvisor:

Preqin, the investment alternatives data provider, found that the number of active U.S.-based public pension funds in private equity has risen year over year, from 266 in 2010 to 299 in October 2014. The average allocation to private equity was 7% as of October 2014, down from 7.2% a year earlier.

Preqin said private equity looked set to remain an important component of U.S.-based public pension funds’ portfolios for years to come, offering investors good portfolio diversification and outsized returns over the long term.

Fundraising for the year was likely to be strong, Preqin reported, with $254 billion raised by funds that closed in the first half.

A record 2,205 funds are currently in the market seeking an aggregate $774 billion, compared with 2,098 funds that were looking to raise $733 billion in January.

Preqin also reported that its internal data showed co-investment would increase in 2014. It acknowledged that concerns about high expenses and competition were holding back some general partners from offering co-investment opportunities. But researchers found that co-investment figured prominently in the plans of many GPs and limited partners.

Preqin said that as the private equity industry matures and investors become more sophisticated, co-investment activity could increase, with benefits for both fund managers and limited partners.

Preqin also found that venture capital funds raised more money in 2014 than in 2013.

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Does Rhode Island’s Pension Fund Performance Justify Its Fees?

David Sirota is shining more light on the Rhode Island pension system’s investment returns—and fees—under Treasurer Gina Raimondo. According to his reporting, the combination of fees and “below-median” returns are costing the state’s taxpayers. From Sirota:

According to four years’ worth of state financial records, Rhode Island’s pension system has delivered an average 12 percent return during Raimondo’s tenure as general treasurer. That rate of return significantly trails the median rate of return for pension systems of similarly size across the country, based on data provided to the International Business Times by the Wilshire Trust Universe Comparison Service.

Meanwhile, the pension investment strategy that Raimondo began putting in place in 2011 has delivered big fees to Wall Street firms. The one-two punch of below-median returns and higher fees has cost Rhode Island taxpayers hundreds of millions of dollars, according to pension analysts.

Under Raimondo’s watch, the state’s pension fund has adopted an investment strategy that heavily utilizes private equity, hedge fund and venture capital investments. The New York Times reported that those alternative investments constitute almost a quarter of the fund’s assets. Sirota writes:

The high fees associated with those alternative investments — costing Rhode Island $70 million in the 2013 fiscal year alone, the Providence Journal reported — are supposed to buy above-average investment performance. However, according to pension consultant Chris Tobe, the gap between Rhode Island and the median, a gap to which the fees contributed, means the state effectively lost $372 million in unrealized returns.

By way of comparison, $372 million represents more than one-half of the entire annual budget of the state’s largest city, Providence. In all, had Rhode Island’s pension system merely performed at the median for pension systems of similar size, the state would have 5 percent more assets in its $7.5 billion retirement system.

Raimondo’s office defends the investment decisions. A spokesperson told Sirota that the strategy needs to be judged over a longer timeline to more accurately assess its effectiveness.