Canada’s 2006 private equity market neared record C$70bn

Canadian private equity funds had a record-setting C$65.5 billion under management last year, according to a report that also found the country’s growth in capital and returns have outpaced the United States’ for the past five years.

Private equity capital under management in Canada swelled by 16 percent from 2005 to 2006, hitting an all-time high of C$65.5 billion ($61 billion; €45 billion). Of that amount, approximately 58 percent, or C$31.2 billion, was capital managed by private funds – up 40 percent from the previous year, according to a report released by management firm McKinsey & Co.

The study found that Canada’s market in 2006 was largely characterised by rising foreign investment, likely to increase as US firms face a shortage of deals comparative to available capital. Canada’s market also mirrored that of the US, it found, with record-setting fundraising levels, and amplified deal size and scope – all of which are predicted to continue growing.

Onex Corporation led the 2006 fundraising pack, closing Canada’s largest-ever fund on C$3.9 billion, and accounting for the largest portion of the C$8.7 billion-worth of new funds raised – up from C$1.7 billion in 2005.

Meanwhile, mega deals such as Fortress Investment Group’s $2.8 billion buyout of Intrawest, a Canadian travel and resort company, highlighted the increasing entwinement of domestic and foreign investments and investors, the study found.

Canada’s market is smaller than the US’ (the study points out US funds raised $198 billion last year), but its growth of capital and its returns have outpaced its southern neighbour in the past five years, McKinsey found. Since 2002, Canadian buyout fund growth has risen 82 percent, compared to 62 percent in the US, while in the same period Canadian buyouts have produced 23.7 percent net returns compared to the US’ 6.8 percent.

“Interviews with senior private equity professionals confirmed the survey findings and suggested that Canada’s market is coming of age,” concluded the report. “Canadian-based investors are finding new opportunities at home and becoming increasingly important market players on the North American and world stage.”