CPPIB buys $1bn PE portfolio from Australia’s Future Fund

Australia's $85bn sovereign wealth fund brought the stakes to market in the second half of last year in a process run by Setter Capital.

The Canada Pension Plan Investment Board (CPPIB) has acquired a portfolio of private equity stakes worth around $1 billion from Australia’s Future Fund as the sovereign wealth fund attempts to rebalance its portfolio.

Future Fund came to market last year with the stakes in a process run by Toronto-based Setter Capital, according to three sources familiar with the deal. The deal closed in early January.

Around half the portfolio included a A$500 million ($358 million; €326 million) exposure to funds managed by Los Angeles-headquarted Oaktree Capital Management, and the portfolio sold for close to par, according to a report in The Australian.

UK regulatory filings shows Charterhouse Capital Partners’ ninth fund (CCP IX) was also included in the transaction, with Future Fund selling about 30 percent of its stake in the €4 billion vehicle to the Canadian pension giant.

In an Australian Senate committee hearing on 9 February, Future Fund managing director David Neal said its private equity portfolio had performed “extremely well” and that was part of the reason behind rebalancing it.

“It was becoming a large part of our portfolio and it is very illiquid,” Neal said. “So we took the opportunity to take a cross-section of that portfolio and sell that in a transaction to relatively modestly rebalance our private equity exposure.”

Future Fund had previously expressed concerns about supply and demand for investor capital in the private equity market and the negative impact of this on expected returns.

“From our perspective, many segments of the market are not offering sufficient return for the risks we are expected to take,” the fund noted in its Annual Report 2014-2015. “[W]hile attractive opportunities for deploying capital can still be found, when one does arise, there can be fierce competition for it.”

Future Fund had A$118.4 billion in assets as of 31 December, according to its website. About 10 percent of the fund, or A$12.3 billion, was allocated to private equity through 28 managers on 31 December, down from 12 percent on 30 September.

Vehicles the Future Fund was invested in at the end of last quarter include those managed by Apax Partners, Bain Capital, Hellman & Friedman, Adams Street Partners and HarbourVest Partners, according to its website.

Sovereign wealth funds were the fifth most active sellers in 2015, accounting for 8 percent of sales by volume, according to a report by Evercore released in January.

CPPIB was both an active buyer and seller on the secondaries market last year, selling stakes in three Bridgepoint funds to Lexington Partners and Hamilton Lane in July, as well as increasing its exposure to Apax Partners’ seventh fund in January, as Secondaries Investor reported.

CPPIB, Future Fund, Charterhouse and Setter declined to comment. Oaktree did not return a request for comment by press time.