North American LPs see past Brexit into opportunities

Various public pension funds in the US and Canada have voiced their unaltered long-term outlook for private equity and see potential opportunities arising from market volatility.

North American public pension funds are sticking to their long-term outlook for private equity in light of the UK’s decision to exit the European Union.

The Public Employees Retirement Association of New Mexico (PERA) isn’t too concerned about the implications of the UK exiting the European Union on its private equity portfolio. Its chief investment officer Jon Grabel told Private Equity International that for now, it is sticking to its long-term view when it comes to private equity.

PERA, which manages $14.07 billion in assets, has previously invested in mega private equity funds such as Charterhouse Capital Partners X, which held a first close on €1.5 billion, $2.86 billion KSL Capital Partners IV and $4.5 billion RRJ Capital III, according to PEI.

“For the long term, we’re not adjusting anything as it relates to private equity,” Grabel said. His stance echoes the C$77 billion ($59 billion; €53 billion) Ontario Municipal Employees Retirement System’s view that it bought its private market assets in the UK with a long-term outlook and believes they will “generate solid returns.”

On the other side of the continent, the $107 billion Washington State Investment Board (WSIB) agreed it will not change its long-term global investment strategies either because it doesn’t “take tactical positions” on events like Brexit, according to WSIB chief investment officer Gary Bruebaker.

But as long-term investors with private capital, these pension funds may be eyeing some investment opportunities that arise out of the volatility.

Grabel said if a UK-based company was in the middle of a transaction that fell through because of Brexit, a private equity buyer could take advantage of the market volatility and get a great value on that deal, for example. “I always think there are opportunities out of market dislocation and it’s dangerous to look at only one strategy in isolation versus the portfolio as a whole,” he said.

The Canada Pension Plan Investment Board (CPPIB), which manages C$278 billion in assets, also realises the potential for investment opportunities as markets experience up- and downswings.

“As any investor, we have a bias to stability over uncertainty, yet periods of dislocation can present compelling opportunities that short-term investors are unable to pursue,” a CPPIB spokesperson told PEI.


Marine Cole and Elizabeth Wu contributed to the report.