CVCA: Canadian PE ‘needs more foreign investment’

Canada's Venture Capital & Private Equity Association is calling on foreign limited partners to invest in the country’s private equity industry.

Canada's Venture Capital & Private Equity Association (CVCA) is calling for more private equity investment from foreign limited partners, having witnessed a sharp decline in commitments from foreign LPs last year. 

“Our venture capital and private equity industry wants and needs more foreign investment,” CVCA president Gregory Smith said in a statement. “We are sending a signal to international investors…That signal is really a green light.” The CVCA has released a study highlighting the country’s strong historical private equity performance.

Canadian private equity firms saw a decline in commitments from foreign limited partners last year, with non-Canadian LPs accounting for 31 percent of buyout and mezzanine fundraising in 2009, down from 54 percent in 2008.

CVCA executive director Richard Remillard expects foreign investment in 2010 to at the very least hold steady compared to 2009. “I wouldn’t expect the [2010] numbers to be down at all,” Remillard told PEO. “In fact, I expect them to be up.”

During the first three quarters of 2010, both Canadian investment activity and fundraising exceeded levels during the same period last year.

“There has been more attention on the country as a whole,” Remillard said. “And then within the country, when we look at things like the overall level of foreign investment, people buying Canadian bonds and Canadian stocks, there seems to be quite an influx of capital.”

Performance data from Thomson Reuters shows that Canada is still one of the most attractive regions in which to invest, as Canadian private equity continues to outperform the US and European private markets, the study says.

As of 2009, Canadian private equity had achieved a net return of 16.8 percent over a five year period, and a 14.2 percent return over a ten year period, outperforming European private equity’s returns of 11.9 percent and 8.3 percent, respectively, according to the report.

The Canadian economy has outperformed the rest of the G7 countries in recent years, with a 1.7 percent growth rate from 2000 to 2009. The most recent International Monetary Fund forecast predicts Canadian GDP growth to reach 3.6 percent in 2010, well above the 2.3 percent expected growth for all other members of the G7.

Canada’s debt to GDP ratio of 35 percent is also the lowest among leading industrial economies, according to the study, and the Economist intelligence Unit has ranked Canada as the No. 1 place to do business in the G7 for the next five years. During the economic crisis, no Canadian banks failed, none required public capital injections and interbank money markets continued to function.

Canada has also enjoyed a AAA international credit rating from Moody’s since 2002, and has led the Milken Institute Capital Access Index for the past two years in terms of access to finance.

Founded in 1974, the CVCA is comprised of 136 member funds with over C$75 billion (€55.8 billion; $74.7 billion) in capital under management.