By David G. Barry
Despite a tough start to its fiscal year, the Canada Pension Plan Investment Board (CPP Investments) did not shy away from deploying capital.
Since April 1, the CA$523 billion (US$409 billion) investment management organization has deployed more than US$5 billion [SO1] in private equity, credit, and real assets – roughly half in funds and half in co-investment and follow-on transactions.
For the quarter ended June 30, CPP Investments – Canada’s largest pension plan – reported a negative 4.2% net return and a decline of net assets of US$12.5 billion. It said it had a net loss of US$18 billion offset by contributions to the fund of $5.48 billion.
CPPIB said the negative 4.2% outperformed returns for leading global indices, many of which had double-digit declines.
Over the past five years, it has had a net return of 8.7% and a 10-year net return of 10.3%.
CPP Investments, which manages the capital of 21 million contributors and beneficiaries of the Canada Pension Plan, had a net return of 6.8% for the fiscal year ended March 31.
CPP Investments said the fund’s quarterly results were driven by losses in public equity strategies due to the broad decline in global equity markets. It said that private equity, credit, and real estate contributed modestly to the loss. Gains by external portfolio managers, quantitative trading strategies, and investments in energy and infrastructure contributed positively to the results, it said. CPP Investments also saw US$2.4 billion in foreign exchange gains.
In a statement, CPPIB’s president and CEO, John Graham, said the fund’s first fiscal quarter “was not immune” to what he described as “the most challenging first six months of the year in the last half century” for financial markets. But he said that CPP Investments’ “active management strategy – diversified across asset classes and geographies – moderated the impact on the fund, preserving investment value.”
Graham added that CPP Investments expects the “turbulence” to “persist throughout the fiscal year.” He said that the fund’s “resilient portfolio was designed to create value over the very long term as demonstrated by our continued strong 10-year net return, even as we expect to experience double-digit percentage losses one year in 20.”
Among the fund commitments it made during the first five months of its fiscal year were (all numbers in U.S. dollars:
· $300 million to the Hillhouse Real Asset Opportunities Fund, which aims to invest in the new economy real estate sectors in China focusing on life science, data centers and logistics.
· $205 million to TDR Capital V, which is focused on mid-buyout investments of companies based in or with significant operations in Europe.
· $150 million to NewQuest Asia Fund V, which will focused on secondary transactions involving middle-market companies and general partners within emerging Asian Markets.
· $150 million commitment to Oak Hill Capital Partners VI, which will invest across the industrials, media & communications, business services and consumer sectors in the U.S.
· $400 million to Apax XL, a private equity firm focused on upper middle-market and large cap transactions.
· $333 million to Sequoia Capital’s 2022 APAC fundraise, comprising commitments to the Sequoia China funds and the Sequoia India/South East Asia funds.
· $160 million to Lumina Strategic Solutions Fund, a Brazil-focused special situations credit investment manager.
· $50 million to Radical Fund III, a venture fund focused on AI opportunities in Canada and the United States.
· $100 million to Trustar Capital V, the private equity affiliate of CITIC Capital, which is focused on control-oriented buyouts in Greater China.
· $410 million to EQT X.
· $100 million to Kimmeridge Fund VI, a U.S.-based alternative asset manager focused exclusively on the energy sector.
CPP Investments also invested:
· $50 million in a co-investment alongside Silver Lake for a 4% stake in Entrata, a developer of property management software that focuses on multi-family residential apartments.
· $120 million in a co-investment alongside CVC Capital into Sajjan India Limited, a specialized agrochemical manufacturer in India, for an up to 17% stake.
· $35 million in a co-investment alongside CVC Capital into Razer Inc., a global lifestyle brand for gamers, providing gaming peripherals, gaming laptops and desktops, gaming accessories and software solutions worldwide.
· $50 million in a co-investment in Anaplan alongside Thoma Bravo for an approximate 0.5% stake. Anaplan is a U.S.-based provider of cloud-based planning and analytics software.
· $824 million additional to Renewable Power Capital to acquire 100% of four onshore wind farms in central Sweden. RPC is CPP Investments’ European onshore renewables platform.
· And an additional $548 million to Indlnfravit Trust, its Indian toll roads portfolio company. Indlnfravit used the capital to acquire five operating road concessions from Brookfield Asset Management for $685 million.
· An additional $225 million to KDV II, its second development joint venture with partners ESR and APG. KDV II invests in and develops a best-in-class industrial and warehouse logistics portfolio in the Seoul and Busan metropolitan areas in South Korea. CPP Investments holds a 45% stake in the joint venture.