Year-End Spotlight: Canadians demand control

Canadian pensions in 2009 revealed intentions to build up their in-house investment teams and cut back on reliance on external fund managers.

The C$43 billion (€28 billion; $40 billion) Ontario Municipal Employees’ Retirement System and the C$70 billion Alberta Investment Management Corporation (AIMCo) both outlined plans in October to build their in-house investment teams to move more into direct investing and away from committing funds to investment managers.

Year-End Spotlight

“External managers get 2 percent no matter what,” Leo de Bever, chief executive officer of AIMCo, told PEO in an interview. “I may be paying 4 percent every year on the amount of capital invested and no returns in the current environment. That’s a very painful way to invest, as opposed to my own guys who don’t start earning any money in terms of variable compensation until the asset does at least as well as comparable public markets.”

Alberta has made about $2 billion in commitments to external private equity managers, of which about $1 billion is actually drawn. Alberta will continue to look for opportunities to commit funds to external managers, but will be patient and cautious about whom it chooses to manage its money, de Bever said.

Meanwhile, OMERS, which opened offices in New York and London as part of its effort to bolster its direct investing capabilities, announced a goal to have 80 percent of the private equity portfolio in direct investments, and 20 percent in external fund managers. The fund’s private equity portfolio is 65 percent invested through fund managers and 35 percent through direct investments.

The pension has about $4 billion invested in private equity, according to Paul Renaud, president and chief executive officer of OMERS Private Equity.

“OMERS very much believes in active management in terms of adding value to the investment process more so than passive management,” Renaud told PEO. “We have the size, scale and resources we’ve been building up over time to build up a direct [investment] programme.”

OMERS may look to exit some of its existing relationships with managers through the secondaries market, but only if attractive opportunities arise, Renaud said.

For comprehensive information on related LP actions in 2009, consult the archived PEO coverage listed on the right.