CPP Investment Board Makes Further Major Private Market Investments

The CPP Investment Board announced today that it will invest a further $325 million in private equity opportunities.

The investments are:

• $190 million to the Canadian merchant bank Borealis Capital Corporation, consisting of $20 million to buy a 26 percent ownership interest in Borealis, plus commitments over five years of $150 million to its buyout fund and $20 million to its venture capital fund. Additional commitments may be made to Borealis infrastructure projects.
• A $135 million commitment over four years to Paul Capital Partners VII, L.P., sponsored by Paul Capital Partners, a U.S. private equity firm. The new $1.2 billion fund will acquire U.S. and European limited partnership interests in the secondary markets. Other investors include U.S. and European pension funds, foundations, banks, and individuals.

To date, the CPP Investment Board has invested or committed $542 million to private markets, or about 5 percent of the $11 billion in assets reported on June 30, 2001. In June, the CPP Investment Board announced that it would ultimately invest up to 10 percent of assets in private markets. The process involves commitments to external managers who draw down the funds over four or five years as suitable investments are identified.

These are fund managers who know how to generate attractive private market investment opportunities in North America and Europe," said Mark Weisdorf, the CPP Investment Board's vice president responsible for private market investments. "The key for us is teaming up with seasoned professionals with proven expertise in highly specialized sectors of the investment industry."

The CPP Investment Board will be an equal owner in Borealis with the Ontario Municipal Employees Retirement System (OMERS). The other major shareholder with a 40 percent interest is the management team led by Steve Hudson, founder of Newcourt Credit, Ian Collier, former head of OMERS merchant banking, and Michael Nobrega, head of Borealis Infrastructure. Other investors include Credit Suisse First Boston.

The $500 million Borealis Buyout Fund will acquire equity in Canadian private companies and the $100 million Venture Capital Fund will pursue North American technology solutions that serve the financial community. Investors in these funds, in addition to the CPP Investment Board, OMERS and Borealis Management, include three Canadian banks and three Canadian life insurers.

Paul Capital Partners has $3 billion under management with investments in 200 private equity funds. Established in 1991, it employs 35 investment professionals in San Francisco, New York and Paris.

Mr. Weisdorf noted that it can take several years for private equities to earn superior returns "but with a 20-year investment horizon before we may be asked to return funds to the Canada Pension Plan to pay benefits, we are confident the results will be worth the wait."

The CPP Investment Board currently invests in publicly traded equities with approximately 70 percent in funds based on the TSE 300 Index and 30 percent in U.S. and international index funds. Private market investments are expected to produce higher returns than public equities over the long term.

The CPP Investment Board is a crown corporation created by an Act of Parliament in December 1997. It invests funds not needed by the Canada Pension Plan to pay current pensions. Cash flows are currently invested only in equities to balance the bond portfolio owned by the Canada Pension Plan. By increasing the long-term value of funds, the CPP Investment Board will help the Plan to keep its pension promise to Canadians. The CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments.