CPP Investments Commits An Additional C$200M to Northleaf's Canadian FoFs

Palash Gosh of Pension & Investments reports CPPIB adds to private equity mandate with Northleaf Capital:

Canada Pension Plan Investment Board, Toronto, committed an additional C$200 million ($147) million to the Canadian private equity market through an evergreen Canadian midmarket mandate managed by Northleaf Capital Partners.

A CPPIB spokesperson said the name of the fund is Canadian Fund-of-Funds V and that as an evergreen mandate, it's an additional commitment to a customized mandate with the pension fund.

Since the private equity investment partnership between CPPIB and Northleaf was established in 2006, Northleaf now manages a total of C$2.4 billion in Canadian private equity investments on behalf of CPPIB, a Sept. 14 news release said.

Northleaf's mandate for CPPIB focuses on maximizing net returns through primary fund investments in small- and midmarket Canadian buyout and growth funds, secondary investments and direct co-investments, the news release said.

As of June 30, 2023, CPPIB assets totaled C$575 billion.

As of March 31, CPPIB had C$146 billion in private equity investments out of total assets of C$570 billion, a spokesperson confirmed.

Northleaf has raised more than $23 billion in private equity, private credit and infrastructure commitments from public, corporate and multiemployer pension plans, endowments, foundations, financial institutions and family offices, the release said.

Last week, CPP Investments put out a press release stating it has extended its relationship with Northleaf through a C$200 Million commitment to the Canadian private equity market:

Toronto, CANADA (September 14, 2023) – Canada Pension Plan Investment Board (CPP Investments) and Northleaf Capital Partners (Northleaf) today announced that CPP Investments has extended its longstanding private equity investment partnership with Northleaf. CPP Investments has committed C$200 million to the Canadian private equity market through an evergreen Canadian mid-market mandate managed by Northleaf. Since the partnership was established in 2006, and with this allocation, Northleaf now manages a total of C$2.4 billion in Canadian private equity investments on behalf of CPP Investments.

Northleaf’s customized mandate for CPP Investments focuses on maximizing net returns through primary fund investments in small and mid-market Canadian buyout and growth funds, secondary investments and direct co-investments.

“Through this Canadian private equity program managed by Northleaf, CPP Investments is able to efficiently access best-in-class Canadian private equity firms and co-investments, driving risk-adjusted returns for the CPP Fund,” said Caitlin Gubbels, Managing Director, Head of Funds, CPP Investments. “Importantly, Northleaf continues to provide strong expertise and capabilities in the management and execution of this program.”

“We look forward to continuing our partnership with CPP Investments in managing this additional capital and constructing a focused portfolio of top-tier Canadian private equity funds, secondaries and direct co-investments,” said Mike Flood, Managing Director and Head of Private Equity, Northleaf. “We value and appreciate CPP Investments’ confidence in our team, investment process and track record and are proud to have supported them in advancing their Canadian program since 2006.”

As at June 30, 2023, CPP Investments net assets in Canada totalled C$82 billion, representing 14% of total assets.

As part of its global private markets program, Northleaf has been one of Canada’s most active private equity investors. Over the past 15-plus years, Northleaf has committed more than C$3.4 billion to Canadian private equity investments and served on the Limited Partner Advisory Committee of more than 80 Canadian funds.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 21 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At June 30, 2023, the Fund totalled $575 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or Twitter.

About Northleaf

Northleaf Capital Partners (Northleaf) is a global private markets investment firm with more than US$23 billion in private equity, private credit and infrastructure commitments raised to date from public, corporate and multi-employer pension plans, endowments, foundations, financial institutions and family offices. Northleaf’s 250-person team is located in Toronto, Chicago, London, Los Angeles, Melbourne, Menlo Park, Montreal, New York and Tokyo. Northleaf sources, evaluates and manages private markets investments, with a focus on mid-market companies and assets. For more information on Northleaf, please visit www.northleafcapital.com.

Alright, for those of you who don't know them, read more about Northleaf:

Northleaf Capital Partners is a global private markets investment firm with US$23 billion in private equity, private credit and infrastructure commitments under management on behalf of public, corporate and multi-employer pension plans, endowments, foundations, financial institutions and family offices.

Founded as TD Capital, a subsidiary of TD Bank Financial Group, Northleaf transitioned to a management-owned firm in 2009 and now has US$23 billion of private equity, private credit and infrastructure commitments under management. The Northleaf team comprises more than 200 professionals across offices in Toronto, Chicago, London, Los Angeles, Menlo Park, Melbourne, Montreal, New York and Tokyo. Northleaf’s clients include corporate, public and multi-employer employee pension and benefit plans, endowments, foundations, government agencies, financial institutions, family offices and high net worth individuals. 

As a global private markets investor with strong Canadian roots and a long, well-established track record, Northleaf is dedicated to generating attractive, long-term investment returns through building enduring relationships with its investors, investment partners and colleagues based on trust, openness, respect and the highest standards of integrity and professionalism. Northleaf has an established investment program, experienced team and a business model based on a strong alignment of interests with our investors.

I'm pretty sure I met some of the founding partners (Michael Flood and Stuart Waugh) when I was helping Derek Murphy set up private equity at PSP Investments, when they were still part of the TD group.

Smart group of people and they have managed to build an impressive shop at Northleaf.

Also worth noting, Shane Feeney, the former Head of Private Equity at CPP Investments is now a Managing Director, Global Head of Secondaries at Northleaf:

The latest infusion of money from CPP Investments is to invest in a Canadian fund of private equity funds which was established back in 2006 to invest in mid-market funds.

I must admit, I'm not an expert in Canadian private equity, not exactly a space I track closely.

Apart from Brookfield which is a global juggernaut, Onex founded by Gerry Schwartz and Sagard Private Equity Canada (SPEC) which is owned by the Desmarais family, I can't say there are many great PE shops in Canada worth investing in.

You can add Northleaf to that group as they are big enough and well established to be included there.

As far as the smaller shops, I know a few but I need to really kick the tires to see if their track record is as good as they claim.

Caitlin Gubbels, Managing Director, Head of Funds, CPP Investments states: “Through this Canadian private equity program managed by Northleaf, CPP Investments is able to efficiently access best-in-class Canadian private equity firms and co-investments, driving risk-adjusted returns for the CPP Fund. Importantly, Northleaf continues to provide strong expertise and capabilities in the management and execution of this program.” 

You probably want to add a layer between CPP Investments and investing directly in smaller Canadian PE funds.

I remain a little skeptical on Canadian private equity and prefer US private equity (much bigger market) but again, I do not track this space closely.

You can read the latest CVCA report here for more details.

I would like a lot more transparency on where Northleaf invests that $2.4 billion fund of funds (which funds and how much for each stake) as this is Canadians' pension assets.

Let me wrap it up there as I can't add much more except to say CPP Investments invests more than its share in Canadian public and private markets.

Below, David Ross from Northleaf Capital Partners goes in-depth with James Dunn from The Inside Network on 'The Power of Three: Northleaf Brings Its Capabilities to Australia'.