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Canada-Based Investors in Private Equity – February 2013

by Firakh Patel

  • 26 Feb 2013
  • PE

Canada-based investors continue to be an important and stable source of capital for the private equity industry. Preqin's Investor Intelligence database tracks 4,884 LPs that are active in the private equity asset class, of which 124 are based in Canada.

Canada-based LPs manage aggregate assets of over CAD 5.1tn and investors in the country on average look to allocate a larger proportion of their total assets to private equity compared to the US. The average target allocation to private equity of Canada-based LPs (excluding fund of funds managers) is 13% of total assets, with investors in the country on average having 11.9% currently allocated. In comparison, investors in the US have average current and target allocations to the asset class of 11.3% and 11.6% respectively.

Interestingly, public sector pension funds in Canada account for almost a third (29%) of LPs investing in private equity in the country. This is significantly more than the 12% of private equity investors that public pension funds account for in the US. A notable example of a Canadian public sector pension fund investing in the private equity asset class is CPP Investment Board; it has 17.1% of total assets allocated to the asset class and is the second largest public pension fund in the world by current allocation to private equity. Private pension funds (17%) account for the second highest proportion of Canada-based investors in the asset class, followed by foundations and multi-family offices, which each make up 8% of the total.

Sixty percent of Canada-based investors in private equity have either invested in, or expressed a preference for investing in venture capital vehicles, with 47% having a preference for buyout vehicles. In terms of location preferences, 77% of Canada-based LPs have either invested in or have expressed a preference for investing in North America. Despite a strong preference for domestic funds, a significant number of LPs in Canada are open to allocating capital to vehicles targeting Europe (50%) and emerging markets (35%).

Canada-based investors continue to make up a prominent part of the private equity landscape in North America, and with Canadian LPs on average under allocated to the asset class they are likely to be an important source of capital for managers on the road in 2013.

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