LPs

CPPIB emerges as buyer of $1.7 bln Ontario Teachers’ PE portfolio

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PSP Investments, Canada, pension fund, private equity
Photo courtesy of Reuters/Chris Wattie
  • Why this is important: Pricing is strong, encouraging sellers into the market
  • OTPP AUM: C$189.5 billion (US$143.3 bln)
  • OTPP PE investments: C$32 bln

A big secondaries deal just went down north of the border: Canada Pension Plan Investment Board bought a portfolio of private equity stakes valued at about US$1.7 billion sold by Ontario Teachers’ Pension Plan, sources told Buyouts.

The deal was done by CPPIB’s North American team, one source said. Greenhill Cogent was secondary adviser on the deal.

The teacher pension system had about C$32 billion of PE investments as of Dec. 31, 2017. That was up from C$27 billion as of Dec. 31, 2016, according to pension documents.

PE was generating an 18.8 percent return as of 2017, the documents said.

OTPP had C$189.5 billion of assets under management as of Jan 1, 2018.

Ontario Teachers’ is one of several public systems selling PE interests on the secondary market this year.

Others include Florida State Board of Administration, selling an about $1.3 billion portfolio; and Maryland State Retirement and Pension System and Los Angeles County Employees Retirement Association, both of which were shopping portfolios valued at around $1 billion.

Other systems considering selling on the secondary market include Pennsylvania State Employees’ Retirement System and Colorado Public Employees’ Retirement System.

LP stake sales still represent the bulk of activity on the secondary market, though GP-led liquidity processes have grown increasingly important in recent years.

Sellers are crowding the market because pricing is strong, sources have told Buyouts. There’s also a sense that the strong markets could be at the peak and the best move would be to sell now, sources said.

Average high bid for all secondaries strategies was 93 percent of net asset value in the first half, according to Greenhill Cogent’s first-half volume report.

Buyout funds garnered the highest prices at 98 percent of net asset value, off from 99 percent of NAV in 2017, the report said.

First-half deal volume came in around $32 billion, up 18 percent from the year-earlier period, Evercore said in its volume report. Total volume last year came in at an estimated $54 billion, Evercore said.

CPPIB and OTPP declined comment.

Action Item: Check out Ontario Teachers’ annual report here: https://bit.ly/2B19G7