TORONTO (Feb 14, 2023)– The Investment Management Corporation of Ontario ("IMCO") closed 12 private equity direct and co-investments totaling over $500-million and committed more than $2-billion to strategic partners in 2022, in line with its long-term strategy of building its portfolio. IMCO's Private Equity team continued to deploy capital prudently across a diversified set of companies designed to strengthen the portfolio's ability to withstand market fluctuations. Capital commitments to strategic partners will be deployed over the coming years into attractive investment opportunities in multiple sectors and geographies.
"Despite a turbulent and uncertain market environment, IMCO's Private Equity team deployed capital in 2022 consistently and nimbly, strengthening our relationships with strategic partners through a combination of fund commitments and direct investments, and maintaining discipline and focus on our long-term strategy,"" said Craig Ferguson, Managing Director, Private Equity, IMCO. "Our program is designed to continue to grow with a focus on investing consistently across vintage years' of private equity while seeking attractive risk-adjusted returns, investing alongside our best-in-class partners with deep sector expertise."
2022 Investment Highlights with Existing Strategic Partners
Select direct and co-investment transactions alongside strategic fund partners included:
- Trinity Life Sciences alongside Kohlberg & Company.
- Barracuda Networks alongside KKR.
- Emler Swim School alongside Morgan Stanley Capital Partners and North Haven Capital Partners VII.
- 123Dentist in partnership with Peloton Capital Management and KKR.
- CDK Global Inc. in partnership with Brookfield Capital Partners.
- Beeline alongside Stone Point Capital.
IMCO also committed additional capital to existing fund partners: EagleTree Partners; Kohlberg & Company; Nordic Capital; Peloton Capital Management; TorQuest Partners; and Sumeru Equity Partners.
Added New Partners in 2022
IMCO Private Equity also established relationships with several new strategic partners:
- Stone Point Capital;
- Brookfield Capital Partners; and
- Apax Global Impact, the first impact fund for IMCO’s Private Equity portfolio.
IMCO's Private Equity program is designed to achieve superior risk-adjusted returns for clients through a differentiated hybrid approach to investing, leveraging long term relationships with best-in-class strategic partners around the world, with a highly experienced team capable of making direct equity and co-investments. IMCO's Private Equity team is predominantly targeting investing in companies in North America and Europe. The portfolio seeks to invest across a range of sectors such as industrials, business services, consumer, technology/media/telecommunications, healthcare, and financial services.
It's Valentine's Day so I'll try to remain sweet in my post even if I'm quickly losing patience with people who are still pondering if the US and global economy will escape a hard landing.
Really? That's like wondering if the new healthcare proposal the federal government signed with the provinces is a sustainable long-term solution:
Premiers agreed on Monday to accept a federal offer that will add $46-billion in new health care funding over 10 years even though it falls far short of what the provinces and territories say they need.
“This is not long-term, sustainable funding that will address the health care challenges that we have across our country,” Manitoba Premier Heather Stefanson said after an hour-long virtual meeting of the premiers and territorial leaders on Monday.
Of course it isn't! A friend of mine, a CFO even shared this with me earlier today:
“So now, we have two levels of government collecting taxes on the same social benefit. Oh joy!
I mean the provinces have been running their health care systems into the ground hoping that the Federalies come to the rescue. They just won a lottery ticket.”
Damn right they won a lottery ticket after running their healthcare systems into the ground (did McKinsey consult them? Seriously!) and this $46 billion band-aid will not solve the ongoing deterioration of Canada's healthcare system.
My friend was the one who said we need to treat healthcare liabilities like we treat pension liabilities.
I even wrote about it here and said we either create a Canada Healthcare Fund modeled after CPP Investments or we simply have our existing large pension funds share the responsibility of funding Canada's healthcare system.
Period, end of story.
In addition to this, I stated it's about time all the provinces hike up the salaries of nurses and teachers!
Maybe they will not get the millions they pay their pension managers (everyone in finance is way overpaid in my humble opinion, very few can make a fortune starting off with zero, less than 0.000000001% of population), but they should be properly compensated for the work and responsibility that goes into their job.
Not doctors, nurses, other healthcare staff and teachers, they're the ones getting the short end of the stick in Canada (amazes me why they stick around here after being treated like garbage before, during and after the pandemic).
The older I get the less tolerance I have for BS whether it's in finance, pensions, healthcare, education, retirement, you name it.
I'm old, grumpy and cynical, see BS every single day and feel like Walter Matthau and Jack Lemmon in the movie Grumpy Old Men (great movie, reminds me that I need to watch it again).
Let me just get one thing off my chest, can people stop telling me the US economy will avoid a hard landing with the unemployment rate at historic lows.
I'm an economist by training and a damn good one because I know how to blend markets into my economic scenarios.
So does Francois Trahan. There's a reason why he entered the All-America Research Team Hall of Fame at the age of 47 after winning No. 1 in Portfolio Strategy for ten of the past 11 years leading up to 2016 when got got inducted.
It's the same reason I tell all institutional readers who read this blog (pension funds, sovereign wealth funds, hedge funds, private equity funds), don't be cheap, pay up for Trahan Macro Research and don't stay there getting it for free indefinitely (that pisses me off too).
Hell, I'll tell the broker dealers on Wall Street to pay up for his research because no matter how good your internal strategist/economist is, Trahan is better.
Period, no BS, end of story.
There are a lot of copycats but only one Francois Trahan (maybe we should get together and make sequel to Grumpy Old Men, lol).
If you can't afford his research, track some of his insights on Twitter and LinkedIn.
Francois is getting the hang of social media and he's on a roll but I warned him:
- Don't bother engaging with idiots who don't know their elbow from their arse
- Most people don't want to know the truth, especially when it's ugly
That's right, they don't want to know the truth about when McKinsey comes to town (how Isabelle Hudon is still BDC's President and CEO is beyond me!!) or that Michael Sabia's most senior executive assistant ("KC") when he was President and CEO at the Caisse was part of a Quebec based cult and she tried to recruit me in there in a sneaky way (that didn't work well, lol).
I kid you not! I shared a bunch of anecdotes on Sabia, Luc Verville, Christian Pestre, Henri-Paul Rousseau, Richard Guay, Andre Collin last week when I covered Daniel Fournier's return to institutional real estate as he gets ready to soon take over leadership at Oxford Properties.
And everyone one of them is true (I'll even take a lie detector test if needed and have other proof...like written emails) but no Quebec based reporter dares to interview me!
LOL! It's fine, why listen to Kolivakis, he's a washed up pension guy with progressive multiple sclerosis and Grave's Disease (hyperthyroidism) complaining about his sciatica. People just read him because they feel sorry for him (they should feel sorry for themselves and take the pity party elsewhere, I've got Cretan genes, my ancestors took on the Nazis for ten fateful days and changed the trajectory of WWII).
No, people cannot take bad news, we have a society made up of a bunch of butter boys and girls, a bunch of Instagram peacocks and puff cakes who love taking selfies and spreading a bunch of ESG nonsense around to make them feel better about themselves.
We have basically devolved into a society of wimps (more the men than the women, I might add).
That's fine, the truth often hurts but the older I get, the less patience I have for BS -- ESG BS or any other BS!
That brings me to two points:
First, to all existing employees at Oxford Properties, I was told from a pretty reliable source that Dan Fournier is extremely impressed with the internal talent there and he wants to enable people to unleash that talent.
So if you're good and are progressive in your views, you have nothing to worry about.
If you like the status quo and think everything is just fine, you probably should polish up your resume (not that I expect Dan to come in swinging an ax, just that he has firm views and knows what he needs to get Oxford to the next level).
And like Michael Turner, Dan Fournier is very lucky to inherit a portfolio Blake Hutcheson built during his long tenure heading up that organization, diversifying outside of Canada and getting into all the new sectors (Turner built on Blake's work and vision).
The second point I want to get to is this:
PLEASE READ THIS CAREFULLY AND PIN IT ON TOP OF YOUR DESK!! https://t.co/4unfs23NGz
— Leo Kolivakis (@PensionPulse) February 14, 2023
I don't care if you're the CEO of CPP Investments, PSP Investments, OMERS, OTPP, CDPQ, AIMCo, IMCO, HOOPP, BCI, CAAT Pension Plan, OPTrust, Vestcor, CalPERS, CalSTRS, you name it, if you don't get this through your heads, you're done, you're toast, your career is over even if you try to blame others for not heeding this warning!
Capiche? OVER! As in see you later alligator, "the Board has accepted your resignation" (code for termination of a CEO) and good luck with your next gig (don't worry, all CEOs and CIOs have golden parachutes except if they get terminated with cause so they ride off into sunset with millions no matter how well or poorly their fund performed).
I even posted this on LinkedIn and added two comments
- Another buddy of mine, a CFO (same one from above), rightly notes: "Companies do not fire people after one bad earnings report, but after a few of them , hell yes, they have to cut costs, there's simply no choice, or else you're toast." All this to say EMPLOYMENT IS A LAGGING INDICATOR!You don't skate where the puck was osti!
- Even my buddy who trades currencies and thinks they can push out recession till 2024 sees a very hard landing ahead. He thinks the Fed and other central banks are going to end up hiking rates a lot more aggressively before this all over. Attachez vos tuques comme on dit au Québec ... Ça va faire mal en osti!
Forgive my francais osti but one of the things I love the most about living in Quebec is the French Québécois slang and swear expressions (they truly have the best expressions and even sing about it).
The Quebecois (French, English, Ethnic, pure laine and non pure laine) all know BS when they see it and they're not shy to express their strong disdain.
These are the people and millions of other hardworking Canadians that I really want to target writing this blog, not the pension and financial elites who are extremely well off (and they know it).
Alright, let me get back to IMCO and poor Craig Ferguson, their Managing Director, Private Equity who's probably reading this comment and panicking right about now (as is Bert Clark).
Relax, I'll be blunt but fair in my comments below.
First, I see economic hardship ahead and this will impact all asset classes, private and public all over the word.
There's no escaping the carnage no matter who you are and how good you are.
I don't care if it's Blackstone, Brookfield, Apollo, KKR, and so on and so on, they will all feel the pain I'm talking about.
The same goes for Canada's Maple 8 which should be Maple 9,10, 11, 12 by now (see my list above).
It's going to be a very rough two, maybe three years ahead and of course there will be plenty of opportunities along the way, but don't expect quick fixes or miracles.
As Francois Trahan has stated many times, he hasn't seen a worse economic backdrop in his career and when you add rising geopolitical tensions and my fear of a private debt crisis which is about to explode, it's going to be HELL over the next two years as we are only now entering the brutally cold phase of the bear market (last year was nothing, an appetizer).
We are truly entering uncharted territory, unlike anything we have ever seen, and it might turn out a lot worse than the recessions of 1974-75 and 1982 which were really bad.
"But Leo, unemployment is at historic lows, stock market is up YTD, everything is just peachy you goddamn SOB!"
Oh PLEASE, shut up with nonsense, I too see people eating at packed restaurants, more job openings than available workers, this is all about to disappear and fast!
Yup, no more trading meme stocks in your parent’s basement, you're going to actually have to shake a leg and earn a living like the rest of the working stiffs in the world.
Coming back to private markets, the only guy who has openly discussed the sea change in private equity is Jim Pittman of BCI (see big trouble brewing in Private Equity).
Gordon Fyfe, BCI's President and CEO, made three important decisions in his pension career:
- Hire Leo Kolivakis as his first investment hire at PSP back in October 2003.
- Hire Jim Pittman (not Derek Murphy) to head up PE at BCI.
- Rehire Mihail Garchev back to BCI after that jerk he hired fired him without cause (Dunatov, aka don't know anything)
Those are the three best hiring decisions Gordon Fyfe ever made (in that order), right there folks.
And I'll take that to my grave!
Like I said, I'm turning into a very grumpy old man and have little patience for BS.
Anyway, Jim Pittman was in town this summer and I grabbed a beer with him at the Keg downtown in Place Ville Marie where he had meetings and he totally gets it.
The good times are OVER in Private Equity!!!
FINITO! CAPUTO!!
Yes, it will remain a very important asset class for all pension funds and institutional investors around the world, but that big fat gravy train PE party, kiss it goodbye in an era of higher rates for longer where credit is harder to come by.
And if the private debt bubble explodes, good luck, we are talking about a long winter in Private Equity and other private markets.
Only Jim Pittman has stated this publicly, saying in an era of higher rates and QT, his team has to readjust their expectations a lot lower.
That means all you novices who have never lived through or experienced a real bear market and a whopper of a recession/ depression, you are about to see one and YOU WILL NEVER FORGET IT!!
Jim Pittman, Gordon Fyfe, John Graham, Jo Taylor, Blake Hutcheson, Barb Zvan, Deb Orida, and other senior pension executives have seen their share of crises but even they will be surprised when this is all over.
That much I can guarantee them.
Now, IMCO and Craig Ferguson.
He's doing his job and a good job and he's right:
"Our program is designed to continue to grow with a focus on investing consistently across vintage years' of private equity while seeking attractive risk-adjusted returns, investing alongside our best-in-class partners with deep sector expertise."
You need to diversify by sector, geography, vintage year and co-invest alongside world-class partners to reduce fee drag in good and especially bad times.
Every major pension fund in Canada has roughly the same approach (OMERS is a bit more unique doing more direct deals on its own in recession proof industries).
They invest in "best-in-class" PE funds all over the world and co-invest to reduce fee drag.
Craig Ferguson even gave an exclusive interview to Buyouts on how rocky fundraising may help normalize PE model.
A note to IMCO's communications, when you agree to these exclusive interviews, make sure you provide a link on your website where your clients and the public can read it for free (like OTPP does).
It's insane how these industry publications get away from charging ridiculously high subscription fees for content that should be free to pension fund clients and the public.
What else? A few months ago, I learned that the investment in Peloton Capital Management was not Craig Ferguson's decision but came straight from the top.
I covered Peloton's differentiated approach back in 2019 when I was working in the Advisory group at KPMG (don't get me started on that short stint, I knew Compliance would kill that gig) and think highly of the founders Steve Faraone, Mike Murray (both formerly at OTPP) and Stephen Smith, the billionaire businessman who backed their seed fund up (my boss at KPMG, a nice guy, "suggested" I cover PCM on my blog, so I did and that comment zipped through Compliance, shocker!).
It's a solid fund, they're doing well and have recently announced the first close of PCM’s second fund (PCM Fund II) with C$425M in aggregate commitments.
But there's no way you can tell me that IMCO didn't have better options to invest in than PCM!
It helps when Stephen Smith can make one phone call to Ed Clark (Bert Clark's father) or a former OTPP CEO and get an allocation from IMCO.
"Who cares Leo, good for them, they got the allocation and have to perform like other PE funds or else they're toast!"
Absolutely true, but I am a stickler for unflinching, comprehensive transparency and top governance, and if I went to IMCO's Chair Brian Gibson and Bob Bertram (two highly regarded veterans of the pension industry) and told them exactly what I'm saying here, namely, it wasn't Craig Ferguson's decision to invest in Peloton Capital Management, they'd have "no comment".
But I would ask IMCO's Board to look into these allegations and take them extremely seriously.
Again, this may turn out to be a great long-term investment and a great long-term relationship, but that's not the point. It pisses me off when billionaires use their clout to get favors from public pension funds.
I don't know Stephen Smith from a hole in the wall, have no interest in meeting him, but if he was in front of me right now, I'd tell him straight out: "You might be a highly regarded and successful billionaire but don't ever use your clout to gain favors from public pension funds."
And let me be crystal clear, it wasn't Craig Ferguson who shared this with me, it was someone else who has nothing to do with IMCO.
Something about that PCM allocation doesn't smell right to me and the truth should come out (those guys never contributed a dime to my blog but that has nothing to do with the truth).
As George Carlin once stated: "It's a Big Club, you and I aren't part of the Big Club."
Alright, let me end it there as I've stated enough (been on a roll lately because I making a lot of money on my own and proud of it, now only long US dollars and will shift into US long bonds once yield on 10-year Treasury note surpasses 4.5%).
I'm all for IMCO's PE approach and their approach in general in all asset classes, partnering up with a few world-class partners (writing huge tickets) and co-investing alongside them to reduce fee drag.
Just want the governance standards to remain extremely high no matter what billionaire they know.
Also, word of advice to everyone reading my blog, be very careful wasting money on lawyers trying to intimidate me. If you have something to say, just contact me directly and I can edit and correct anything and state I was wrong. I become a ferocious Pit Bull when lawyers engage me and go into attack mode (what you're reading lately is my cheerful side, don't ever have a bailiff wake me up early in the morning with a demand letter, I'll come at you twice as hard on my blog as a couple of former PSP lawyers know all too well).
Lastly, before I forget, please take the time to read IMCO's newly released 5-year strategic plan "From Foundations to Our Future"here as it is excellent and deserves a separate comment on its own (IMCO and all pensions need to contact me and improve the relationship as I don't chase after anyone).
Below, Nada Eissa, former Deputy Assistant Treasury Secretary under George W Bush and associate professor at Georgetown University, and Jason Furman, Harvard Professor and former Chairman of The White House Council of Economic Advisers under President Obama, join 'Squawk Box' to discuss economic conditions impacting CPI, potential Fed response to the CPI numbers, and Fed and market outlooks aligning.
Listen carefully to Nada Eissa and Jason Furman, they get it!!
Next, earlier today, Jeremy Siegel, Wharton professor of finance, joins the 'Halftime Report' to discuss the market response to the hotter-than-expected CPI report.
Like I stated on LinkedIn earlier:
Have tremendous respect for professor Siegel, at least he states his views openly, but he was smoking "hopium" on CNBC's Halftime Report earlier today. A "No Landing" scenario in the second half of the year? The Fed will cut rates in second half of the year? I think it will cut because of a very hard landing resembling a depression and when they cut in 100 basis point chunks, stocks are going to go down even more (as panic sets in)!! Beware here, even super smart professors like Jeremy Siegel and Campbell Harvey don't see it yet but Edward Leamer's seminal paper "Housing Is The Business Cycle" will prove them ALL wrong.
And Michael Kantrowitz, chief investment strategist and head of portfolio strategies at Piper Sandler, joins 'Squawk Box' to discuss today's CPI report numbers, forecasts about further drops in earnings expectations, and the consequences from the lag effect of inflation.
Trahan hired "Kantro" back at Cornerstone Macro, taught him (almost) everything he knows but I'll give him a plug here as he's now at Piper Sandler and even though he's bearish, he's still too bullish in my eyes. How does S&P blow 3,000 sound to you? Stick around, the nightmare is just beginning.
Lastly, to cheer you up, watch this movie, it's a classic and so funny!