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Caledon fills growing LP appetite for tailored PE, infrastructure programs

In 2006, David Rogers left his job as the head of the private equity group at Ontario Municipal Employees Retirement System (OMERS) to pursue a long-cherished ambition.

He wanted to build a new and independent portfolio management and advisory firm capable of giving institutional investors new ways of accessing private equity and infrastructure.

As it turned out, Rogers’ timing could not have been better.

As a recent Towers Watson report indicated, many pension funds and other institutional LPs have become disillusioned with conventional market entry vehicles, such as funds of funds. Tired of paying fees often for mixed results, many are increasingly seeking more direct strategies, individualized to their specific needs.

The latter is a fair description of the services platform created by Caledon Capital Management, which Rogers founded in 2007.

Caledon specializes in designing and implementing customized accounts in PE and infrastructure for small and mid-sized institutions of all types. Each account program is individual, tailored in collaboration with clients to fit specific criteria and risk preferences, and made flexible enough to be adjusted over time.

“We try to operate as an extension of the in-house management teams of institutional investors,” Rogers told peHUB Canada. “Emphasizing transparency and alignment, Caledon aims to replicate the best practices of leading Canadian pension funds, and ensure that small and mid-sized institutions have the same investment opportunities available to the large ones.”

Caledon signed up its first institutional client in 2008. At the time, the fledgling organization had two employees: Rogers and partner Jean Potter.

Seven years on, Caledon has emerged as a major player on the global institutional LP landscape. Today, it is working with eight institutional clients, and is finalizing arrangements with two more. The majority of these are Canadian and U.S. public and corporate pension plans sized between $4 billion and $25 billion.

This year, assets overseen by Caledon on behalf of these clients rose to more than $5 billion.

Additionally, the firm reported it has closed more than $700 million of infrastructure and PE direct investments and fund commitments so far in 2014. This activity ranges from partnership commitments to global PE and infrastructure shops to co-investments and club deals that tap directly into Caledon’s international network of strategic and institutional investors.

One of Caledon’s clients is the US$11 billion New Mexico Educational Retirement Board (NMERB). In 2011, NMERB hired the firm to help it revise and build out an infrastructure program. Caledon now also sources, vets and completes co-investment opportunities for the pension system.

Caledon’s expanded client base and market scope is being supported by a team of people that now totals 20. They include 13 experienced investment pros, led by partners Rogers, Potter, Martin Day, Asif Hussain, Justin Kusinskis and vice president Jeff DeBlock. The firm also has a five person back-office complement that operates as a resource to clients.

Day, who joined Caledon in 2012 after serving for nine years as a managing director at OMERS Private Equity, believes the firm’s rapid growth owes to a more sophisticated community of institutional investors.

“I sense a greater awareness on the part of small and mid-sized institutions about the breadth of options that exist for accessing alternative asset classes,” he said. “They are shopping for customized programs that allow them to choose those activities and strategies which suit them best. Increasingly, they are unwilling to settle for anything less.”

Day believes that Caledon is attracting clients because “they like the quality, value-add and cost-effective approach we bring to the customized accounts process.”

He also credits trends that show billions of institutional capital being deployed or targeted to core, income-producing infrastructure: “When small and mid-sized institutional investors are looking for exposure to infrastructure, Caledon is among the few specialty firms to which they can turn.”

The firm recently set up an advisory committee to facilitate its governance and share expertise. The committee’s newest member Colleen Sidford is the former CIO of Ontario Power Generation. She joined Patrick Madigan, previously a managing director at Macquarie North America, and Dean Metcalf, previously a senior PE professional at Ontario Teachers’ Pension Plan.

Caledon’s headquarters are located in Toronto.

Photo courtesy of Shutterstock