PSP Investments ramps up PE investing to $6.3 bln last year, earns 16.1 pct return

Public Sector Pension Investment Board, Canada’s fourth largest pension system, increased activity in the global private equity market last year, deploying $6.3 billion.

The outlay, noted last week in PSP Investments’ fiscal 2019 report, is up 43 percent from the $4.4 billion disbursed in fiscal 2018. That helped push PE portfolio assets to $24 billion.

Growth was fuelled by co-sponsorships and co-investments, which made up roughly half of last year’s total.

Most direct deals were located in North America and Europe. They included investments in U.S. insurance broker Alliant Insurance Services, alongside Stone Point Capital, and German elevator parts maker Wittur Group, alongside Bain Capital.

PSP also partnered with EQT in acquiring Belgian chemicals and food ingredients distributor Azelis. In March, Azelis grew its Canadian market presence by purchasing Chemroy.

Additionally, PSP reported record PE exits in fiscal 2019, among them Antelliq, a French livestock digital tracking solutions company, sold to Merck for US$2.4 billion. BC Partners was the majority owner.

Last year’s sale of Sky Leasing, an Irish aircraft leasing platform, to Goshawk, reportedly for US$2.8 billion, also provided a liquidity event. PSP and ATL Partners first invested in 2015.

As a result, PE investments generated a one-year return of 16.1 percent in fiscal 2019, exceeding a benchmark of 12.3 percent. Performance also improved relative to fiscal 2018, when the portfolio earned 12.9 percent.

These data indicate PSP is continuing to reap the rewards of a four-year strategy that changed the way it invests in PE and infrastructure, in part by doing more direct deals.

The strategy significantly boosted PSP’s in-house personnel, resources and operations worldwide. It also expanded its relationships with outside funds and investment partners.

In a 2018 interview with PE Hub Canada, Guthrie Stewart, global head of private investments, said the initiative is “all about building scale and generating returns.” Direct deals, recently accounting for a return in the mid-20s range, are a key driver, he added.

Since the strategy’s launch in fiscal 2016, PSP has invested an unprecedented $18 billion in the PE market.

In contrast, PSP was somewhat less active on the infrastructure side last year, deploying $2.8 billion, down 15 percent from fiscal 2018’s $3.3 billion. Just over 60 percent of fiscal 2019 disbursements were made on a direct basis.

The infrastructure portfolio, which ended the year with $16.8 billion in assets, achieved a one-year return of 7.1 percent, compared to a benchmark of 4.6 percent.

PSP manages the retirement savings of federal public employees, including defence forces and the Royal Canadian Mounted Police. It earned an overall one-year return of 7.1 percent in fiscal 2019, lifting total assets to $168 billion from a prior $153 billion.