PSP Investments boosts PE investments 43 pct, beats benchmark for FY 2019

  • PSP deployed 43 pct more to PE in fiscal 2019 than FY 2018
  • PE portfolio assets sit at C$24 bln
  • Most direct deals are in North America and Europe

Public Sector Pension Investment Board, Canada’s fourth largest pension system, ramped up activity in the global private equity market last year, deploying C$6.3 billion ($4.7 billion).

The outlay, noted in PSP Investments’ fiscal 2019 report, represents an increase of 43 percent from the C$4.4 billion disbursed in fiscal 2018. That helped push PE portfolio assets to C$24 billion ($17.9 billion).

Growth was fueled by co-sponsorships and co-investments, which made up roughly half of last year’s total.

Most direct deals were located in North America and Europe. They included investments in U.S. insurance broker Alliant Insurance Services, alongside Stone Point Capital, and German elevator parts maker Wittur Group, alongside Bain Capital.

PSP also partnered with EQT in acquiring Belgian chemicals and food ingredients distributor Azelis. In March, Azelis grew its Canadian market presence by purchasing Chemroy.

In terms of liquidity, PSP reported a number of exits in fiscal 2019, among them Antelliq, a French livestock digital tracking services company that was sold to Merck for $2.4 billion. BC Partners was the majority owner.

Last year’s sale of Sky Leasing, an Irish aircraft leasing platform, to Goshawk, reportedly for $2.8 billion, also provided a liquidity event. PSP and ATL Partners first invested in Sky Leasing in 2015.

Thanks to the exits, PSP’s PE investments generated a one-year return of 16.1 percent in fiscal 2019, easily beating a benchmark of 12.3 percent. Performance also improved relative to fiscal 2018, when the portfolio earned 12.9 percent.

PSP appears to be reaping the rewards of a four-year strategy shift it began in fiscal 2016. The strategy significantly boosted PSP’s in-house personnel, resources and operations worldwide. It also expanded its relationships with outside funds and investment partners.

In a 2018 interview with Buyouts, Guthrie Stewart, PSP’s global head of private investments, said the initiative is “all about building scale and generating returns.” Direct deals — which recently accounted for a return in the mid-20s range — are a key driver, he said.

Since the strategy’s launch, PSP has invested an unprecedented C$18 billion in the PE market.

In contrast, PSP was somewhat less active on the infrastructure side last year, deploying C$2.8 billion, down 15 percent from fiscal 2018’s C$3.3 billion. Just over 60 percent of fiscal 2019 disbursements were made on a direct basis.

The infrastructure portfolio, which ended the year with C$16.8 billion in assets, achieved a one-year return of 7.1 percent, compared to a benchmark of 4.6 percent.

PSP manages the retirement savings of Canadian federal public employees, including defense forces and the Royal Canadian Mounted Police. It earned an overall one-year return of 7.1 percent in fiscal 2019, lifting total assets to C$168 billion from C$153 billion the previous year.

Room for more deal partners

Stewart last year said PSP’s strategy aimed to build external relationships to include more PE and infrastructure firms able to add value and “drive direct investments.”

Existing partners include American Securities, Apax Partners, Apollo, Ardian, BC Partners, Blackstone Lightyear Capital, MBK, New Mountain Capital, Partners Group and TPG.

In its fiscal 2019 report, PSP said it signed new fund commitments of C$3.5 billion through 16 new funds, mostly with existing partners.