Private Equity Gains Steam Among North American Endowments, Research Shows

(June 21, 2012) — North America-based endowments are stepping up their allocation to private equity, a study by Preqin shows.

According to its research, these institutions have remained committed to private equity investment, with 94% intending to increase or maintain their exposure to private equity in the longer term. Over half (58%) of North America-based endowments expect to make their next private equity commitment before the end of 2012 and a further 10% in 2013.

“Like many institutional investor types, North American endowments have been impacted by the tumultuous financial markets in recent years,” Preqin’s Emma Dineen stated in a release. “Despite some of these institutions being faced with liquidity issues and over-allocation to the asset class, many have ramped up their exposure to private equity investment over the past few years and it is clear that this important investor group remains committed in the long term.”

Dineen added that while turbulent financial markets have made investors more cautious, many North American endowments are proving their dedication to private equity by making plans for their next fund commitments.

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Furthermore, Preqin’s study revealed that 72% of respondents view North America as presenting the most attractive opportunities for private equity investment, while 31% identify Europe as such.

Additional research by the Private Equity Growth Capital Council (PEGCC) points to the allure of private equity investments. New analysis by the firm showed that private equity has consistently beat the S&P 500 index.

“Private equity continues to outperform the S&P 500 over both near and long time horizons,” said PEGCC President & CEO, Steve Judge. “The consistent private equity outperformance of public markets is essential for pension funds, university endowments and charitable foundations to achieve their investment goals. Private equity helps provide retirement security to millions, makes college a reality for more students and funds charitable causes.”

(June 21, 2012) — The $115 billion Ontario Teachers’ Pension Plan (OTTP) has acquired a 9.9% stake in Kyobo Life Insurance Co., the third-largest insurance company in South Korea, for $400 million.

“Kyobo is a leading insurance brand with a strong customer base and financial performance,” said Wayne Kozun, OTTP’s senior vice-president of public equities. “We believe our investment is a unique opportunity to acquire a sizeable stake in the Korean life insurance industry’s most profitable company, and further expand our direct investments in Asia. We look forward to being a constructive partner with Kyobo, its management team and its shareholders.”

The deal represents OTTP’s first direct investment in Korea and is the Canadian pension fund’s second major private equity transaction this month. On June 4, OTTP announced that it had joined an investor group to purchase Canadian data center operator Q9 for about $1.15 billion. “Our direct investing goal is to identify companies around the world that we can grow and add value to over the long term,” Deborah Allan, director of communications and media relations at OTTP, told aiCIO at the time. “We feel that the Q9 opportunity is an ideal match for that goal, which ultimately is designed to help us to pay our 300,000 members’ pensions.”

The pension fund has a $12 billion allocation to private equity and boasts that its private equity portfolio has generated an internal rate of return of 19.3% since its inception in 1991.

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OTTP is Canada’s largest single-profession pension fund and administers the plans of 300,000 beneficiaries.