Canadians reticent about private equity

Institutional investment into private equity in Canada is a far cry from US allocations, says a report commissioned by Goodman and Carr.

Canadians have invested around CAD36bn (E26bn) in private equity, according to a market survey commissioned by Goodman and Carr LLP, the law firm, and conducted by Macdonald and Associates, the Canadian venture capital research group.

The value of Canadian assets allocated to private equity fares badly when compared to the size of the market in the United States, where over one trillion dollars are invested in the asset class.

Noting the exponential growth that the US private equity industry experienced in the 1990s, the report claims that a similar development in Canada was unlikely. “A still reticent community of Canadian pension funds, insurance companies, endowments and other institutional investors remains uninformed about private equity as a viable and strategically important asset class”, the survey states.

Given such institutional indifference, it doesn’t surprise that rich Canadians account for the largest contribution made to private equity, with an estimated 32 per cent of the total. Pension funds account for 30 per cent, followed by the corporate sector with 25 per cent. Insurance companies, foreign investors and public sector institutions contributed the remainder.

Looking at venture capital, buyouts and mezzanine as different market segment, the Macdonald survey sent questionnaires to 62 investing bodies, mainly in Quebec and Ontario. 48 of them replied, representing CAD23.5bn.

Canadian institutions with significant exposure to private equity include the CPP Investment Board, the Ontario Municipal Employees Retirement System, CDP Sofinov and the Ontario Teachers’ Pension Plan Board.