OMERS Private Equity returns 19% in 2012

The Canadian pension plan’s private equity portfolio outperformed all other asset classes in 2012, driven by its shift into direct investing, says OMERS Private Equity CEO Paul Renaud.

The Ontario Municipal Employees’ Retirement System’s private equity portfolio generated a 19.2 percent return in 2012, driven primarily by OMERS’ direct private equity investments.

“Our returns in 2012 from direct investing are a lot higher than our returns from fund investing,” chief executive officer of OMERS Private Equity Paul Renaud told Private Equity International.  Last year, OMERS Private Equity generated a 7.23 percent return.

Roughly two-thirds of OMERS’ C$6.5 billion (€4.8 billion; $6.4 billion) private equity portfolio is comprised of direct investments, with the remaining third in fund investments. OMERS has not made any new commitments to private equity funds since 2009, but has nearly C$500 million of unfunded commitments to general partners.

“Our goal is eventually to become 100 percent managed directly for private equity, so we’re not making new fund commitments,” Renaud said, adding that “every year, the amount of capital that’s called gets smaller and smaller”.

Paul Renaud

OMERS Private Equity outperformed every other asset class in the pension plan’s private market portfolio, with real estate returning 16.9 percent, infrastructure returning 12.7 percent and OMERS Strategic Investments – comprised primarily of oil and gas assets – returning negative 10.1 percent. 

“The year-end valuation of these assets was negatively impacted as oil and gas prices fell to their lowest levels in five years,” OMERS said in a statement.

OMERS’ private market portfolio returned 13.8 percent last year, helping drive the pension plan’s overall return of 10 percent in 2012. OMERS grew its net assets by C$5.7 billion during the year, to C$60.8 billion.

The pension plan has grown its private equity team considerably in recent years, and last September hired two investment professionals in its London office, including director Isabelle Pagnotta, a former principal at mid-market firm Arcapita, bringing its European team to nine individuals. OMERS also hired Bryony Marshall, former corporate finance professional at advisory firm Hawkpoint, as an associate. 

“When you’re doing direct investing, you’re not only doing the deal but you’re also working with the management team post the transaction,” Renaud said.  “We’ve been building more at the director/associate level. I would say the more significant hires at a senior level occurred back in 2009 when we established offices in New York and London.”

OMERS Private Equity now has 32 investment professionals across its three offices.

While OMERS did sell a portfolio of 11 private equity fund investments and related unfunded commitments to AXA Private Equity in a secondary transaction valued at $850 million last July, the pension does not have plans to pursue additional secondary sales this year, according to Renaud.

“Opportunistically if it makes sense for us to exit we will, but we do not need to make the exits,” he said. “We like the funds we invested in.”