CPPIB cuts secondaries commitments for second straight year

Canada Pension Plan Investment Board has been a net seller of private fund stakes for the second straight year, following two years of heavy commitment to the strategy.

The Toronto-headquartered pension made C$0.46 billion ($0.38 billion; €0.31 billion) in commitments across five secondaries transactions in the 12 months to March, according to its latest annual report.

The pension juggernaut cited a high risk/return bar amid a decrease in market activity for the continued slowdown in investment.

This constitutes a 35 percent decrease from the prior fiscal year’s C$0.7 billion in secondaries investments, which dropped nearly 90 percent from C$5.5 billion in fiscal year 2019.

CPPIB completed a C$2.4 billion sale of a portfolio of 20 fund interests and nine passive co-investments last year as part of an active divestiture programme, according to the report.

The report noted that a key focus for the PE unit last year was to further optimise portfolio construction and capital management. It said this involved fund and co-investment sell-downs and enhanced exit review processes for its direct portfolio to plan for future liquidity.

The pension re-integrated its funds and secondaries teams to form one cohesive unit to optimise resources across the strategies, it noted in the report.

In September, Secondaries Investor reported that London-based Dushy Sivanithy had taken over as head of secondaries. He was previously a senior principal in the pension’s private funds team.

The Funds & Secondaries group refined its approach to a tiered prioritisation of general partner relationships across primaries and secondaries.

“This is expected to result in greater exposure to the most impactful relationships both in terms of investment returns and partnership opportunities,” CPPIB noted in the report.

The combined Funds & Secondaries portfolio grew to C$49.4 billion from C$41.3 billion, buoyed by C$15.7 billion in valuation gains and C$6.3 billion newly invested capital. That expansion was partially offset by distributions totalling C$9.1 billion and foreign exchange losses totalling C$4.8 billion, according to the report.

The group has relationships with 131 general partners and reviewed 59 relevant on-strategy opportunities in the last fiscal year. Of the 11 manager commitments, the funds group added one relationship to the programme.

CPPIB’s private equity Asia portfolio also grew in value, to C$22.4 billion from C$15.3 billion during the fiscal year. C$0.5 billion of that value, or 2 percent, exists in secondaries investments.

Overall, the pension’s private equity unit, comprising direct investing, funds and secondaries, increased assets under management to C$125.1 billion from the prior fiscal year’s C$94.6 billion, representing approximately 25 percent of the fund.