Canadian pension funds have been the big-ticket investors in private equity transactions that include North American pension plan participation, according to S&P Global Market Intelligence data.
Canada Pension Plan Investment Board's US$600 million investment in a 2018 series C funding round for Ant Group Co. Ltd. was one of the largest transactions. The pension plan has been the most active limited partner among peers, present in eight of the top 10 largest private equity deals, the data shows.
In total, CPPIB is invested in 311 funds representing roughly US$73 billion in total commitments, according to Market Intelligence data. Private equity buyout vehicles account for 267 of those funds or about US$70.2 billion in allocated capital.
Canada has 22 government-sponsored pension plans and the U.S. has 379, according to the data. But compared with their U.S. counterparts, Canadian pensions tend to be big, well-resourced entities that invest large dollar amounts into a particular fund, said Sheila Ryan, a managing director at Cambridge Associates who advises pension funds on portfolio allocation.
Additionally, Canadian plans often have internal teams with expertise that allows them to execute a range of strategies, including fund investments, co-investments and direct deals.
"Generally speaking to just the size and the scale of those Canadian plans, it kind of pushes them into all these areas because they put so much capital ... to work," Ryan said.
Most public pension plans have targeted the technology, media and telecommunications sector, according to Market Intelligence data.
Technology sector investments, which tend to be growth-oriented, could account for roughly 10% of any pension fund portfolio, Ryan said.
A pension that is not fully funded may use private equity or venture capital growth strategies to help generate return and narrow the funding gap, she added. "And they're looking typically to get 300-plus basis points over public markets," Ryan said.
Pension funds tend to avoid commodity-type strategies, for example, taking stakes in oil and gas companies, Ryan said. Most recently, these investors have been turning to private credit strategies.
"Typically pensions have a fairly large allocation to fixed income, and with fixed income rates being so low over the last many years, a lot of them have been deploying some of their fixed income allocation into private credit strategies that are going to allow them to pick up a few hundred basis points in yield relative to traditional fixed income," she said.