Canadian Pension Funds Grappling With Private Equity Slump
A number of Canada’s biggest investors lost money on their private equity holdings last year as a downturn in the buyout sector continued to weigh on returns at some of the world’s largest retirement funds.
Ontario Teachers’ Pension Plan, which manages C$279bn ($206bn) of assets, and the C$145bn Ontario Municipal Employees Retirement System reported returns of minus 5.3 per cent and minus 2.5 per cent respectively for their private equity portfolios in 2025. For OTPP, it was the worst performance for this asset class since 2008 and for Omers since 2020.
La Caisse, Quebec’s C$517bn state pension fund, also reported weak private equity results. The group said its PE portfolio returned 2.3 per cent last year, well below the 12.6 per cent gain in its benchmark index, half of which is made up of listed stocks.
The Healthcare of Ontario Pension Plan, which published results this week alongside OTPP, reported private equity returns of 3.6 per cent in 2025. Its broader private markets portfolio returned 2.1 per cent, compared with 11.7 per cent for its listed holdings.
“Those are pretty dismal numbers, in private equity returns should be at 15 per cent minimum,” said one Canadian pension investor.
Rising interest rates since 2022 have weighed on private equity investment, with higher borrowing costs hitting dealmaking, returns and exit options.
Canada’s pension system is a major private equity investor with more than 20 per cent of public sector pension money allocated to the asset class, according to think-tank New Financial.
Dale Burgess, executive managing director of equities at OTPP, said private equity investors had been “navigating increased cost of capital, more constrained exit markets and greater operating complexity, creating a drag on returns”.
OTPP’s PE portfolio dropped in value from C$60.4bn to C$50.8bn last year, partly driven by full or partial sales of its investments in insurance brokerage BroadStreet Partners, Indian hospital chain Sahyadri Hospitals and Canadian retirement home provider Amica Senior Lifestyles.
To address the challenges, OTPP said it had made a “strategic shift” towards investing in areas where it believes it has a competitive edge, particularly the financial, services and technology sectors.
Omers said its C$25.6bn private equity portfolio had a net investment loss of C$700mn last year, with challenges in its industrial holdings and “weak performance across our earlier-stage growth and venture portfolios”. In recent months Omers has announced sales in its private equity portfolio including California-based care manager Paradigm and Toronto-based home care business CBI Health.
La Caisse blamed its disappointing private equity results on “slow earnings growth for portfolio companies and lower multiples in the technology and healthcare sectors”.
Overall returns across the pension companies were boosted by buoyant stock markets last year. OTPP’s total portfolio net return was 6.7 per cent, compared with 6 per cent for Omers and 9.3 per cent for La Caisse.
A quick note on the paltry returns in PE portfolios of some of Canada's Maple 8 funds (from the ones that reported thus far).
Last week, I spoke with OTPP's former CEO Jim Leech and asked him point-blank: "What's going on with OTPP's PE portfolio?"
Jim was in good spirits. He had just come back from skiing with his grandchildren in British Columbia and told me: "I don't know. All I can tell you is there is a lot more competition nowadays compared to when I was heading up Teachers' Private Capital."
From my vantage point, covering all these pension plans/ funds, clearly 2025 wasn't a great year in Private Equity, and it wasn't a particularly great year in private markets.
Jim Leech is right, the game has changed significantly, there's way too much competition in private equity and that has spread to infrastructure, real estate and private credit.
Alternatives used to be a niche market, now there’s not much "nichiness" going on. Everyone is doing the same thing, the big giants keep raising bigger funds, and everyone is waiting for some serious financial crisis (aka dislocation in the markets) to put a lot of dry powder to work.
All I know is there is reason to be concerned, the Maple 8 funds shifted billions collectively into private markets over the last 20 years and that game seems stale these days.
Private Equity remains an important asset class but there are a lot of discussions taking place at these large shops.
If you underperform your benchmark over one year or even three years, it's a tough pill to swallow but you'll survive.
If you underperform your benchmark in PE for 5 years, you're in deep trouble.
I'm not sure the situation is that dire, but it's definitely not the best of times for private markets, especially private equity and real estate.
Things might be slowly changing for the better -- I think they are -- but investors are anxious and worried.
Don't forget, in Canada, the whole "raison d'etre" of shifting into private markets was to manage more internally and add value without paying excessive fees.
If you can't deliver there, your whole "value add" proposition is in trouble.
Still, I don't want to take one or two bad years and extrapolate. I think there's a lot of generalizing going on in private equity/ private credit and I want to be very careful because the level of pessimism is a bit absurd in my opinion.
Private equity stocks are finally popping this week, too soon to tell whether they're turning the corner and headed back up for good but I'm paying attention.
All this to say, no doubt, private equity is in a slump but it's not dying and going away, that's just plain silly.
Does the industry need a good shakeout? You bet, it's already underway.
The dispersion of returns of top PE funds and top private credit funds with bottom ones has grown considerably over the last few years.
Only the best will survive and that's the way it should be.
Below, private equity returned fewer profits to investors for a fourth straight year as the industry sat on $3.8 trillion of unsold assets and struggled to raise money for new funds. Bloomberg's Allison McNeely reports (watch this clip here as I cannot embed it below).
Also, Orlando Bravo, founder and managing partner of Thoma Bravo, sits down with CNBC's Leslie Picker to discuss the impacts of artificial intelligence on the software sector.
Third, KKR Co-CEO, Scott Nuttall discusses the firm’s evolution into a diversified global investment platform and its dealmaking priorities with Bloomberg’s Dani Burger at Bloomberg Invest 2026 in New York.
Fourth, Ares Management Corporation Co-Founder & CEO, Michael Arougheti, discusses the private credit cycle, firm growth and the push to expand access beyond traditional institutional investors. He spoke with Bloomberg’s Dani Burger at Bloomberg Invest 2026 in New York.
Lastly, Apollo Global Management Inc. Chief Executive Officer Marc Rowan warned that a shakeout is coming for private credit firms as the industry faces a wave of concerns about rising defaults on loans to software companies.
For weeks, private credit executives have faced questions from investors over whether the $1.8 trillion industry can withstand sustained pressure if the software sector is upended by artificial intelligence in the coming years. Rowan’s comments came as business development companies have been hit by redemptions in recent weeks amid those broader investor concerns.
“This will be a shakeout — I don’t think it is going to be short term,” Rowan said in an interview with Bloomberg News Editor-in-Chief John Micklethwait at Bloomberg Invest in New York. “It was foreseeable. It was predictable. And all you can do is have been a good underwriter, a good risk manager, have done a small number of stupid things.”
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