Caisse shakes up venture strategy

The largest institutional fund manager in Canada has announced plans to significantly increase its venture capital investments.

The Caisse de dépôt et placement du Québec, a leading Canadian public money manager, has announced a significant shake up in its global venture capital investment strategy.

In order to improve returns from its C$1 billion ($820 million; €640 million) venture capital programme, the Caisse has appointed three venture capital firms to manage parts of its portfolio comprising 42 investments.

Paris-headquartered AXA Private Equity will take over the running of the Caisse’s European venture portfolio, managing direct investments in European companies in the IT and life sciences sectors.

Zurich-headquartered SAM Private Equity has been awarded the management of the Caisse’s energy venture portfolio, comprising five direct investments in the European and North American energy sectors.

In the US, Silicon Valley-based VantagePoint Venture Partners has also been awarded a number of mandates as well as receiving a C$125 million commitment from the Caisse to a new fund that it will shortly raise.

The Caisse will also commit C$55 million to a new fund to be raised by ProQuest of Princeton, New Jersey.

As part of the new arrangements, ProQuest, VantagePoint and SAM Private Equity will all open offices in Montreal.

The award of the new mandates is one prong of the Caisse’s new venture strategy, which also includes an injection of additional capital to the venture sector. The firm intends to commit up to C$200 million over the next three years in new funds created by Québec VC firms. To this end, the Caisse has already agreed to commit a total of C$40 million to new funds to be created by Montreal-based venture firms GeneChem and Propulsion.

The Caisse will also provide a total of up to C$150 million over the next three years for co-investment in Canadian technology companies and will also allocate C$20 million to VC firms and incubators specialising in technology prestart-ups and start-ups.

Taken as a whole, the new investment strategy will see the Caisse inject up to C$370 million of fresh capital into the Québec venture capital industry over the next three years, which with leverage could contribute to the creation of venture capital funds in Québec with a total value of around C$1.5 billion by the end of 2007, according to the firm.

Commenting on the strategy, chief executive officer of the Caisse, Henri-Paul Rousseau said: “North American data covering the past 25 years show that, to outperform the liquid markets over the long term, venture capital investors need a first or second-quartile performance. The Caisse would like to step up its venture capital investments to take advantage of the many opportunities on this market and has therefore done a thorough review of its practices in this area to increase its likelihood of obtaining more solid returns.'

The strategy shift comes following a review co-ordinated by Ernst & Young, who were appointed earlier this year to recommend external managers for the Caisse's direct venture capital investment portfolio.

The venture capital portfolio accounts for around 10 percent of the Caisse's total commitment to private equity, which was valued at C$9.9 billion as at December 31, 2003. At September 30, 2004, the firm had invested C$280 million in Québec venture capital funds and technology companies.