CPPIB PE portfolio jumps 25% YoY

The C$287.3bn pension fund also reached a new high for its overall asset value.

The private equity portfolio of the Canada Pension Plan Investment Board (CPPIB) posted a year-over-year increase of 25 percent for the 2017 fiscal year’s first quarter, which ended 30 June.

The Toronto-based fund’s private equity exposure reached C$59.6 billion ($46.02 billion; €41.21 billion), an increase of one-quarter from the C$47.6 billion value reported at the end of the same quarter last year. The 2017 first-quarter figure is also 2.4 percent higher than the C$58.2 billion listed for the three months ending 31 March.

Private equity now represents 20.8 percent of the total assets reported for the Canada Pension Plan (CPP) Fund, a fund within the larger CPPIB, which marked a new peak. The CPPIB is the umbrella organisation that makes investments through the CPP Fund.

The CPP fund climbed 3 percent to C$287.3 billion in net assets, from C$278.9 billion in the previous quarter, and 7 percent from the first quarter of fiscal year 2016. The CPPIB attributed this record high to its net investment income of C$4.1 billion and net CPP contributions to funds of C$4.3 billion.

The portfolio realised a net 1.45 percent rate of return for the quarter. However, the CPPIB said in a statement, due to its multi-generational funding and liabilities, long-term measurements are more appropriate than those calculated on a quarterly or yearly basis. It marked a 9.1 percent and 5.5 percent net IRR for five-year and 10-year periods, respectively.

CPPIB’s private asset portfolio, along with its fixed-income strategy and public equity exposure in Canada and the US, fuelled the fund increase, according to the statement.

During the quarter CPPIB made a number of private investments, including a $2.5 billion agreement to purchase 40 percent of Glencore Agricultural Products in April and a contribution of an undisclosed amount to Teine Energy’s C$975 million acquisition of Penn West Petroleum’s assets in Saskatchewan in June.

It also entered co-investment deals, including one in which CPPIB and the Ontario Teachers’ Pension Plan, another Canadian pension fund, formed a partnership in Mexico with infrastructure developer Impulsora del Desarrollo y el Empleo en América Latina. CPPIB also made another co-investment with Cinven to acquire Spain-based Hotelbed Group from Tui Group for an enterprise value of €1.165 billion.

The CPPIB’s direct private equity programme focuses on North America and Europe, and seeks a range of ownership structures from minority to full control, co-investing alongside its general partners or investing in opportunities that don’t fall under the traditional PE structure, according to its 2016 annual report released in May.

In May, CPPIB named a new president and chief executive officer, Mark Machin, who joined the pension in 2012 as senior managing director. It is also building an office in Sydney for the fiscal year to streamline its operations in Australia, where it has invested C$7.9 billion to-date.