OPTrust to boost directs, co-investments in 2017

The Ontario pension’s private equity portfolio returned 20.6% net IRR last year, far above the overall 6% return.

The Ontario Public Services Employees Union Pension Trust (OPTrust) will look towards direct and co-investments to continue building out its private equity portfolio.

The Toronto-based pension’s 2016 annual report, which was released earlier this month, said it will seek more co-investments and direct investments in 2017 for its private equity portfolio, which stood at a fair value of $1.6 billion as of 31 December.

That accounted for 8.4 percent of OPTrust’s $19 billion of investment assets, down from a 9.2 percent at the end of 2015.

Sandra Bosela, co-head of private markets group and managing director and global head of private equity for OPTrust, told Private Equity International the pension’s private equity portfolio is currently composed of 48 percent in direct and co-investments, and 52 percent in fund commitments.

“We are trying to get to 50/50, so we’re working towards bringing up direct [and co-investments],” she said. “In our private equity strategy, buyouts will continue to be the focus but we are selectively adding long-term equities and opportunistic private credit investments.”

The pension has indeed ramped up its direct and co-investment programme, with OPTrust’s 2015 reportindicating the pension had allocated 34 percent to co-investments and the rest to fund investments that year.

Throughout last year, OPTrust made 10 new commitments – not including re-ups – in North America, Europe and developed Asia totalling $488 million, according to the 2016 report, but noted it was particularly selective about capital deployment due to increased competition and high prices.

Its private equity portfolio generated a 20.6 percent net internal rate of return in 2016, up from 14.4 percent in 2015. The overall fund returned 6 percent net IRR in 2016.

OPTrust launched its private markets programme in 2006 to invest in private equity and infrastructure.