Ten Canadian pension funds are among the top 100 global private equity investors, according to a new report by data and intelligence company Preqin.
The Canada Pension Plan Investment Board was ranked No. 1 while the Ontario Teachers’ Pension Plan, at No. 6 and the Caisse de dépôt et placement du Québec, at No. 7, also made the top 10. The report noted these three pension funds’ current allocation to private equity is $44.4 billion, $21 billion and $20 billion, respectively.
Also on the list were the Public Sector Pension Investment Board (23), the Ontario Municipal Employees Retirement System (26), the Retirement Plans Sinking Fund (44), the Alberta Investment Management Corp. (47), the British Columbia Investment Management Corp. (48), the Government and Public Employees Retirement Plan (65) and the Fonds de Solidarité des Travailleurs du Québec (73).
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“Pension funds are typically some of the largest investors globally, with extensive and diversified portfolios,” says Christopher Elvin, head of private equity products at Preqin, noting the strengths of private equity as an asset class is appealing to pension funds for two main reasons.
“First, there is a strong alignment between the investment horizons of private equity and the long-term focus of pension funds. At the same time, the illiquid nature of the asset class is not such an impediment to pension funds as to some other investors, allowing them to benefit from the often substantial gains they ultimately vest from the fund.”
The report’s largest 100 private equity investors — which also includes public pension funds in the United States, United Arab Emirates, the Netherlands, Hong Kong, Britain and Australia — have a total of $791 billion invested in the industry. On average, they have a private equity allocation of 12.1 per cent of total assets and are targeting an overall allocation of $12.5 per cent to the asset class.
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The report also found 67 of the 100 largest institutional investors are located in North America. Between them, they have an aggregate allocation of $523 billion to the private equity market. Public pension funds account for 43 of the 100 largest investors, while asset managers and insurance companies each represent 13 of the top 100. Although only seven sovereign wealth funds are in the rankings, two are in the top three — Abu Dhabi Investment Authority and the Government of Singapore Investment Corp.
The report notes the private equity industry has experienced eight consecutive years of growth since the global financial crisis. The key factor in its long-term growth, says Elvin, is its ability to provide non-correlated, risk-adjusted returns to investors.
“Many institutions have been seeking to diversify their investment portfolios, and private equity has proven that it can produce robust performance in adverse circumstances,” he adds. “This has seen confidence in the industry rise, and investors have increasingly looked to allocate significant portions of their portfolios to the asset class.”