The $541 billion CPP Investment Board has continued to ramp up its alternative investment exposure, allocating $4 billion across private equity, private credit and other alternative investment strategies, plus another $3.3 billion to direct equity stakes or debt financing of niche technology, biopharmaceutical and other types of companies.
The pension plan has seen returns over the last six months of 7.5% with strong quarterly gains from private equity, real assets and credit investments as well as gains from foreign exchange as the fund profited from a rebound in the U.S. dollar against the Canadian dollar.
“CPP Investments delivered strong results this quarter to achieve a record 10-year annualized net return of 11.6%, reflecting the benefits of diversification and investment selection,” said John Graham, president and CEO in a statement. “As we emerge from the impact of the global pandemic, our teams continue to execute across the organization to deliver sustainable long-term growth for the fund.”
Private equity has been an impactful driver of returns, as has been the case for most institutional investors this year. Alain Carrier, CPP’s senior managing director and head of international, left the pension system joining private equity firm Bregal Investments as its CEO in January. Geoffrey Rubin has assumed oversight on CPP’s international operations on an interim basis, officials said.
CPP’s $141 billion private equity portfolio saw an influx of capital last quarter. With direct equity investments totaling $2.5 billion and fund allocations totaling approximately $2 billion.
Just after the end of Q3, officials allocated $57 million to Summa Equity III, which is managed by Summa Equity — a Nordic-based private equity manager with a mandate to invest in companies that address global challenges. Another US$593 million was put to work with Round Hill Capital for a new joint venture for the investment in the purpose-built student housing sector in continental Europe.
Announced private equity commitments during the quarter were: Clearlake Capital Partners VII ($200 million); Anchor Equity Partners Fund IV ($325 million); Baring Asia Private Equity Fund VIII ($600 million); Carlyle Partners Fund VIII ($350 million); Kainos Capital Partners Fund III ($100 million).
Within direct stakes some of the largest deals were investing $300 million in Sinch to support the company’s acquisition of a cloud-based email delivery platform and another $350 million in Advanced Drainage Systems, a leading provider of water management solutions for use in the construction and agriculture marketplace. CPP now has a 4.6% stake in Advanced Drainage Systems.
Within the US$81 billion credit portfolio at CPP, the past three months have also been busy with a mixture of direct financing deals and fund commitments.
On the fund side, CPP committed to Blackstone Life Sciences Yield ($300 million) and Angelo Gordon’s Essential Housing Fund II ($325 million). Blackstone’s latest life sciences fund invests in royalty streams on FDA-approved products and structured credit opportunities with biotechnology, pharmaceutical and medtech partners. Angelo Gordon’s new fund is designed to provide off-balance sheet financing for homebuilders to enable them to assemble development-ready land.
Direct financing arrangements totaled more than $1 billion including a commitment to provide up to $500 million in financing to Prodigy Finance, a provider of postgraduate student loans for international students attending top schools.
Lastly, within real assets, CPP officials announced a JPY 110 billion (C$1.3 billion) commitment to the newly established GLP Japan Development Partners IV, which is CPP’s fourth modern logistics partnership in Japan with GLP.
The Canadian pension also entered into a joint venture with CSI Properties in Hong Kong to redevelop a mixed-use real estate project comprising residential and commercial spaces in Kowloon, Hong Kong with an equity commitment of C$169 million.
Real assets total $111 billion at CPP and the portfolio includes real estate, infrastructure and sustainable energies investments.
Senior Managing Director and Global Head of Real Assets Deborah Orida was recently named CPP’s first chief sustainability officer. In this new role, she maintains her current duties within real assets but also handles CPP’s approach to ESG initiatives with a distinct focus on climate change.