The Canada Pension Plan Investment Board is committing another $400-million to invest in small Canadian venture capital and private equity funds, cash that will come as a huge relief to the beleaguered sector after a string of years with measly fundraising tallies.
Because CPPIB is too big to manage small investments in smallish funds, the cash will be handed over to North Leaf Capital Partners, which will place the money with venture capital and PE managers over the coming five years. The investment comes on the heels of an identical commitment in 2005.
"We agree that there is a dearth of capital for midmarket Canadian PE managers and Canadian VC firms," said Mark Wiseman, the executive who oversees private equity investments at CPPIB. "We believe that there's an opportunity because we believe there are going to be excellent returns."
The hope is that the dearth of investment for many Canadian startups is a boon for investors, who can cherry pick the best deals and terms to get returns. It's those returns that are the key, because CPPIB has no mandate to invest for any reason other than maximizing returns at acceptable risks. CPPIB has similar fund of funds programs operating in Europe and the U.S.
"We have no policy public policy initative as part of our mandate, but obviously if we are able to maximize return closer to home, that is an added benefit," Mr. Wiseman said.