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CPPIB revamps C$80 bln PE program to extend global deal reach

  • Why this is important: World’s biggest institutional investor in PE is broadening reach
  • AUM: C$368 billion ($276 billion)
  • New platform: C$80.3 billion ($60 billion); 100+ investment pros
  • Integrates directs, funds, secondaries, Asia

Canada Pension Plan Investment Board, the world’s biggest institutional investor in private equity, is reorganizing its program to access a broader set of PE opportunities in a challenging market environment.

The initiative was set in motion nine months ago, when Senior Managing Director Shane Feeney was appointed global head of PE.

Feeney’s job, a new one at the C$368 billion ($276 billion) pension fund, marked the end of two investment departments and created an amped-up PE platform that unites the once divided areas of direct investing, funds, secondaries and Asian investing.

The new platform amasses assets worth C$80.3 billion ($60 billion) at the end of September.

It also brings together more than 100 investment pros, roughly half of them focused on direct PE, operating from Toronto, New York, London and Hong Kong.

Feeney told Buyouts the goal of the reorganization is to further enhance CPPIB’s ability to make long-term investments across a “breadth of deals and structures in the global market.”

By integrating direct investing, funds, secondaries and Asian investing, greater linkages and in-house collaboration can be achieved, he said.

The result, he said, will be especially significant “on the origination side.”

“We need to see as many attractive opportunities as we can, as much deal flow coming through the funnel as possible, to scale assets with the best risk-adjusted returns across products and geographies,” Feeney said.

Boosted sourcing capabilities will also help CPPIB manage today’s “difficult investing environment,” including high multiples and high leverage, he said.

Sustained deal pace

CPPIB backed several of 2018’s biggest deals, among them Blackstone Group’s $17 billion acquisition of a majority stake in Thomson Reuters’ Financial & Risk unit, now called Refinitiv.

It also invested alongside Carlyle Group and GIC in the $12.6 billion purchase of AkzoNobel’s specialty chemicals unit, now called Nouryon, and alongside TCV in the $2.5 billion purchase of sports-data group Sportradar.

And last month CPPIB agreed to invest $500 million in the recapitalization of Oak Hill Capital Partners-owned Berlin Packaging.

These deals point to the partnership-driven nature of CPPIB’s strategy for direct investing. It has core relationships with some 75 PE firms.

Along with a number of 2018 deal partners, such as Blackstone and Carlyle, they include Apollo Capital Management, Bain Capital, CVC Capital Partners, EQT, KKR, Onex, Silver Lake and TPG.

Feeney said core fund partners deliver superior performance and source deal flow, complementing CPPIB’s direct PE team and “allowing us to really scale our internal resources.”

For this reason, he foresees “no reduced fund exposure” or diminishing of CPPIB’s role as a source of limited partner capital as part of the reorganized program.

More capital for directs

Feeney said the PE strategy will stay on its current path, with a focus on “significant growth” in each of the four investment areas.

He anticipates increased capital deployments going to direct PE. Direct investing will continue to be broad in scope, including everything from passive, minority deals as small as $50 million to co-control acquisitions of $1 billion-plus.

Feeney also wants to further diversify portfolio assets through a greater emphasis on Asia-Pacific opportunities. To support this objective, more resources will be committed to the region.

Additionally, he is looking to expand the range of the pension fund’s deal partners.

Along with PE firms, CPPIB partners with non-fund investors, such as corporations, entrepreneurs, families and other institutions.

A prominent example is South African businessman Douw Steyn, founder of BGL, who this year sold a 30 percent interest in the Comparethemarket.com operator to CPPIB for C$1.1 billion.

“Like-minded” non-fund investors lend fresh opportunities, Feeney said, including the option to “hold assets indefinitely.”

New Brunswick-born Feeney joined CPPIB in 2010 from U.K.-based Bridgepoint Capital. Before then, he was a partner and founding member of Hermes Private Equity’s direct investing group.

Senior members of his team include Managing Directors Ryan Selwood, Lori Hall-Kimm, Hafiz Lalani, Nick McKee and Geoff McKay, who oversee direct PE.

Others include Managing Director Delaney Brown, head of funds, Managing Director Frank Su, head of Asia PE, and Managing Director Michael Woolhouse, head of secondaries.