CPPIB ramps up emerging markets exposure

Canadian Pension Plan Investment Board has reported a 65 percent rise in emerging markets private equity assets from its previous financial year.

The C$356.1 billion ($278.1 billion; €235.6 billion) pension had C$9.6 billion invested in emerging markets private equity as of 31 March, representing 2.7 percent of its total investment portfolio, according to its 2018 annual report. This compares with C$5.8 billion, or 1.8 percent of its portfolio, the previous year.

Foreign private equity assets also climbed C$10.2 billion to C$61.8 billion, or 17.3 percent of its portfolio, with Canadian private equity accounting for an additional 0.3 percent.

Emerging markets proved to be the best performer, returning 19.5 percent for the year, up from 15.4 percent in the 12 months to 31 March 2017. CPPIB’s foreign and Canadian private equity portfolios generated 16 percent and 1.8 percent respectively.

“When I first joined 10 years ago, our reference portfolio had no emerging markets exposure,” Suyi Kim, CPPIB’s head of Asia-Pacific, told PEI in February. “Shortly after, that went up to 5 percent, now we have a target of 15 percent, but will likely increase that to 20 percent or higher. Within emerging markets, China is a big component, and hence that’s where our C$150 billion estimate is coming. It is a long-term commitment that we have to the market that we take very seriously in terms of who to talk to and partner with.”

The pension’s secondaries unit invested C$4.2 billion last year, its most active year since it was founded in 2007. One of its largest deals was the restructuring of Peruvian private equity firm Enfoca Inversiones‘ funds, in which it invested $380 million.

The Toronto-based fund completed a number of hefty direct investments last year, partnering with Blackstone and Singapore’s GIC to acquire 55 percent of Thomson Reuters’ financial business and investing approximately £525 million ($710 million; €601 million) for a 30 percent stake in UK financial services firm BGL Group. Notable fund commitments included $400 million for $7.2 billion Onex Partners V and $350 million to the $9.3 billion KKR Asian Fund III, according to PEI data.

Total investment management fees paid to external asset managers climbed to C$1.7 billion, comprising just over C$1 billion in management fees paid primarily to private equity funds and hedge funds, and C$709 million in performance fees.