With the Canadian government promising to increase investment in venture capital funds in order to help stimulate the economy, this blog will take a look at private equity firms based in Canada. Preqin’s Fund Manager Profiles online service currently tracks 345 private equity firms headquartered in Canada, representing 8% of all fund managers based in North America. Canada-based fund managers have an estimated $19.9bn in dry powder available for investment.
As displayed in the chart below, venture capital is the most prominent strategy for private equity firms located in Canada, with 47% of managers favouring this approach. The second most common strategy is buyout, with 24% of firms employing this method of investing. Over half (57%) of private equity firms in Canada are located in Ontario, with the remaining fund managers based primarily in Quebec and the Western regions of the country.
The largest Canada-based private equity fund manager, in terms of capital raised in the last 10 years, is Onex Corporation, which has raised close to $15bn. The firm has a buyout strategy, focusing on large-scale acquisitions of leading businesses based in North America, and an estimated $5.4bn in dry powder available to be committed. Brookfield Asset Management is the second largest Canada-based fund manager, primarily focusing on investments in timber, properties and related infrastructure. It has collected a total of $6.9bn in capital commitments over the last decade, in addition to an estimated $1.1bn in dry powder. DRI Capital is the largest private equity firm to favour venture capital as its main strategy. It has garnered $2.6bn in aggregate capital over the last 10 years and has an estimated $1.5bn in dry powder, focusing on investments in the life sciences sector.
The two largest private equity funds raised by Canada-based fund managers in 2014, as shown on Preqin’s Funds in Market online service, closed significantly above their targets. Onex Corporation’s most recent fund, Onex Partners IV, focuses on buyout investments in North America and raised $5.2bn, significantly more than its original $4.5bn target. The second largest fund raised by a Canada-based firm, Waterton Precious Metals Fund II, closed at $1bn, $350mn over its target. The natural resources vehicle focuses primarily on mining opportunities in North America, but also in Asia, Europe and Australia.
Canada-based private equity firms continue to play an important role in North American private equity. Under the encouragement of the Canadian government, venture capital remains the most widely utilized strategy and should continue to be a prominent feature in the Canadian private equity industry, following the global trend of an increase in the proportion of venture capital-focused vehicles.