Ontario Teachers’, CIC Headline Month of Institutional Cooperation

(December 27, 2010) – Despite the holiday season in most parts of the globe, many of the world’s largest asset owners – including the China Investment Corporation (CIC), the Ontario Teachers’ Pension Plan (Ontario Teachers’), the Canadian Pension Plan (CPP), and Holland’s Algemene Pensioen Groep – have been busy cooperating with private equity firms and other institutional investors on large-scale resource, financials, and infrastructure bids.

In the latest such example, CIC has joined Texas Pacific Group (TPG) Capital and Singapore’s sovereign fund, the Government Investment Corporation (GIC), in a joint bid for Indonesian coal services company PT Delta Dunia Makmur, according to a statement released Sunday by the company. TPG and GIC have previously made an investment of about US$400 million, according to Dow Jones. According to the news source, CIC’s additional capital and involvement will be the first equity investment in Indonesia by the sovereign vehicle, a fund growing in both stature and size in recent years.

The CIC/GIC/TPG investment is just the latest in a long line of cooperative deals in December, however. Earlier this month, Ontario Teachers’ – no stranger to joint deals due to its award winning internal private equity group (Teachers’ Private Capital) – joined with GIC, CIC, the Abu Dhabi Investment Council, and private equity groups JC Flowers and Co. and RIT Capital Partners, among others, to purchase US$1.8 billion worth of shares (an 18.65% stake) in Brazilian bank BTG Pactual. According the Financial Times, each of the lead investors put forth approximately $250 million.

Also joining forces in December were Canada’s CPP, Holland’s Algemene Pensioen Groep, CIC, and the Goodman Group. Their target: 100% of the assets of the ING Industrial Fund, an Australia real estate play. With A$1.4 billion in equity and A$1.2 billion in debt, the fund is valued at A$2.6 billion. Unit-holders of the fund are expected to vote on the joint bid by March. According to the Canadian Broadcasting Company, the CPP would own 42.5% of the holding company formed to house the assets.

Noticeably absent from many joint deals in December – and, indeed, before this month as well – were large American asset owners. While reasons for such an absence are varied, one commonly postulated argument is that the structure of American funds, where the manager-of-manager model reigns, makes joint deals harder to execute.