Caisse de dépôt et placement du Québec (CDPQ) and Ontario Municipal Employees Retirement System (OMERS) are reducing their exposure to directly held private assets, while Ontario Teachers’ Pension Plan (OTPP) is sharpening its focus on collaborative investment models, according to a report by the Financial Times.
The pivot reflects the growing challenges in direct private equity investing, driven by a tougher exit environment, the operational demands of direct ownership, and an increasingly competitive market for talent.
Historically, Canadian pensions have accessed private equity through a blend of direct investments, traditional fund commitments, and co-investments – the latter offering exposure to deals without incurring full management and performance fees.
Canada’s pension system, managing approximately $3.2tn in assets, is among the largest allocators to private equity globally, with around 22% of public sector pension assets committed to the asset class, according to New Financial.
Currently, Canada’s nine largest pension plans allocate roughly half of their private equity exposure through fund investments and half through direct deals and co-investments, based on CEM Benchmarking data. However, the mix is shifting. In an increasingly competitive fundraising environment, fund allocations have become a strategic tool for securing coveted co-investment rights.
CDPQ is midway through a five-year plan to reduce its share of direct private equity holdings from 75% to 65%, while OMERS has pivoted sharply, announcing last year it would no longer pursue direct private equity investments in Europe, favouring fund investments instead.
Ontario Teachers’ remains committed to direct investments but is increasingly pursuing tactical partnerships, citing evolving portfolio and market dynamics.
The private equity industry’s rapid expansion has intensified competition for deals and senior investment talent – prompting some Canadian plans to reassess their US strategies as well.
Moreover, Canadian pensions face stiff competition for talent, with global players like Apollo Global Management offering compensation packages that are difficult to match, according to industry executives.
Meanwhile, Canada Pension Plan Investment Board (CPPIB), the country’s largest pension fund with CAD699bn ($504bn) in assets under management, affirmed that partnerships have always been a central pillar of its approach.
