CPP Investment Board GP performance numbers

With the advent of the internet, and the trailblazing practices of pension funds such as CALPERS, individuals have the luxury of finding out how general partnerships like ours are doing when it comes to earning returns for institutional limited partners. Historically, only those with access to a confidential information memorandum could find out how Buyout firm X or Venture Capital firm Y were doing, performance-wise, at a particular point in time.

Even then, as the saying goes, it was always “top quartile”.

In recent months, the CPP Investment Board has improved its website, and one can now easily determine how Canada’s own pension fund is doing (here). At least in the alternative asset class. Oddly, it isn’t very clear how the public equity portfolio managers are doing in buying and selling stocks; the names of the external managers are clear, but performance, how much they paid for a specific share position? Not available. (Or maybe I just can’t find it.)

The fact that I’m tackling this topic might be seen to be treading on sacred turf, but few people seem to be aware that this data is available, and the CPPIB would be the first to agree that people should be talking about the data; transparency is their mantra.

There are a few key PE metrics on the site, and they give you a decent sense on the following core issues: vintage year of the fund (“final close”), the size of CPPIB’s commitment, how much of that commitment has been invested by the general partner (ie., how much of the fund has gone into deals as at December 31/06), current value of the portfolio, how much money has been distributed to CPPIB as a result of successful/failed investments, and the total value of the portfolio plus the money that has been distributed to CPPIB.

There are some well known Canadian names, plus what can largely be referred to as “brand” U.S. and European funds. 94 different funds in all, including Fund of Fund investments. With multiple commitments with some of the same general partners, there aren’t 94 “relationships”, at least not as of December 31st.

Here are some highlights from the list; I tried to pick off names that our readers would be aware of and interested in. If you are a novice to this industry, here’s what to look for: check the vintage year, the money committed by CPPIB, how much has been invested to date, and the reported value plus distributions figure. If someone is below 50% invested on a 2003 vintage fund, for example, it could well be that they’ve “reserved” the rest of their fund for follow-on investments; don’t assume they haven’t been working for the past 18 months or so. As well, look for 2005 vintage funds that are almost fully invested (the key there is paid-in-capital vs. commitment level). Vintage likely refers to when the fund completed its LP fundraising and first started investing. To think that a merchant banking team stopped raising capital just two years ago and is already fully-invested; remarkable pacing.

The figures that follow cover four categories: CPPIB’s commitment, paid-in-capital (which tells you how much of the fund is invested in deals and/or drawn to pay management fees), reported value, and reported value + distributions (which tells you what the notional simple return of the fund is against the paid-in-capital figure). Obviously, that figure is based in large part on what the manager believes the portfolio is worth as at December 31, 2006, subject to GAAP fair value accounting, which many managers now are forced to utilize. If the “reported value” and the “distributions + reported value” figures are the same, I assume that means that no dividends have been paid to LPs as of yet; oddly, it seems to ignore the capital consumed for management fees. MM means millions:

Canadian Venture Funds

Celtic House VP Fund II (2002 US$):
$13.5MM, $12.7MM (94.1%), $13.9MM, $17.7 (+39.4%)
Celtic House VP Fund III (2005):
$50MM, $11.4MM (22.8%), $8.5MM, $8.5MM (-25.4%)
Edgestone Venture Fund (2000):
$50MM, $44.4MM (88.8%), $17.8MM, $49.2MM (+10.8%)
Edgestone Venture Fund II (2004):
$50MM, $21.4MM (42.8%), $18.5MM, $18.5MM (-13.6%)
Skypoint Telecom Fund II (2001 US$):
$25MM, $17.9MM (71.6%), $11MM, $13.7MM (-23.5%)
TD Capital Legacy VC Fund (2002):
$100MM, $39MM (39%), $28.2MM, $30.8MM (-21%.0)
Ventures West 8 (2003):
$50MM, $22.5MM (45%), $21.4MM, $21.4MM (-4.9%)

One will observe that there was just a single new direct formal commitment made to Canadian venture capital funds during 2005 and 2006. Every member of the CVCA and the broader technology community should find this quite distressing.

I know CPPIB will point to their fund of fund program with TD Capital Private Equity Partners as the place for Canadian GPs to call, but a $150MM commitment to a fund of fund program (to then be spread by TD across 10 or 12 individual funds over three or five years) is but 3x the individual commitment that CPPIB made to venture capital via such funds as Celtic (2005) Edgestone (2000 and 2004) and Ventures West (2003). $10MM slugs via a fund of fund program only serve to round out an insitutional raise (we gratefully received one for our Fund II), whereas the $50MM commitments of days gone by serve as leads.

For me, I cannot accept the argument that they are now “too big” to directly back Canadian VC funds. It takes just a few hours a year to monitor a fund once you’ve done the initial due diligence and made the commitment.

Across all of their Canadian venture and life sciences relationships (inc. the “legacy” fund of funds), CPPIB has committed $488.5MM, of which $234MM is drawn (48%) and the reported value plus distributions is sitting at $215.9MM for a 7.7% loss. No single fund seems to have pulled the overall results down.

I’m sure you’re thinking: that’s why they’ve turned off the Canadian direct venture tap. I hope not, as there can never be another generation of Canadian venture capitalists on that basis. If we stopped electing politicians, merely because of bad policies in the 70s and early 80s, we wouldn’t have elected a new crop in the mid 80s and early 90s that did some important and useful things – policies that are the very foundation of our strong economy today.

Canadian Buyout Funds

Birch Hill Equity Partners III (2005):
$85MM, $27.1MM (31.9%), $0, $0 (N/A)
Edgestone Equity Fund II (2002):
$100MM, $77.3MM (77.3%), $67.7MM, $113.3MM (+46.6%)
Edgestone Equity Fund III (2006):
$100MM, $9.7MM (9.7%), $9.7MM, $9.7MM (flat)
Kensington Co-investment Fund (2002):
$40MM, $35MM (87.5%), $46.8MM, $49.9MM (+42.6%)
Onex Partners (2003 US$):
$150MM, $127.3MM (84.9%), $198.9MM, $292.8MM (+130%)
Perseis Private Equity (2002):
$75MM, $55.8MM (74.4%), $39.8MM, $52.3MM (-6.3%)
TD Capital Legacy Buyout (2002):
$121MM, $76.2MM (63.0%), $79.1MM, $90.3MM (+18.5%)
Tricap Restructuring Fund (2001):
$150MM, $150.5MM (100.3%), $0, $104.4MM (-30.6%)
Tricap II (2006):
$300MM, $0, $0, $0 (N/A)

Across all of their direct Canadian buyout relationships, CPPIB has committed $1.05B, of which about $489MM is drawn (46.5%) and the reported value plus distributions is sitting at $606.5MM for a 24.1% simple return. Onex accounts for half of the reported value, despite being just 15% of the commitments, however.

US Funds

Apollo Investment Fund V (2002):
$150MM, $120.4MM (80.3%), 122MM, $238.5MM (+98.1%)
Apollo VI (2005):
$400MM, $42.7MM (10.7%), $41.3MM, $41.3MM (-3.3%)
Blackstone IV (2002):
$185MM, $143.9MM (77.8%), $181.7MM, $311.3MM (+116.3%)
Blackstone V (2005):
$406.7MM, $141.2MM (34.7%), $156.4MM, 156.4MM (+10.8%)
Carlyle Venture Partners II (2002):
$60MM, $57.8MM (96.3%), $42.1MM, $58.8MM (+1.7%)
CSFB Mid Market Fund (2003):
$140MM, $55.5MM (39.6%), $52.2MM, $57MM (+2.7%)
CSFB Mid Market Fund (2005):
$300MM, $16.3MM (5.4%), $11.8MM, $12.1MM (-25.8%)
Goldman Sachs Vintage Fund VI (2006):
$200MM, $0, $0, $0 (N/A)
Heartland Industrial Partners (2001):
$150MM, $140.4MM (93.6%), $66.7MM, $68.8MM (-51.0%)
JP Morgan Global Inv (2001):
$175MM, $138.9MM (79.4%), $119.6MM, $163.1MM (+17.4%)
JP Morgan Global Inv (2006):
$317.4MM, $250.2MM (78.8%), $245MM, $260.2MM (+4.0%)
KKR Millenium Fund (2002):
$282.5MM, $271.7MM (96.2%), $286.7MM, $392.6MM (+44.5%)
KKR 2006 (2006):
$500MM, $33.6MM (6.7%), $33.6MM, $33.6MM (0%)
KSL Capital Partners II (2005):
$107MM, $15.2MM (14.2%), $11.6MM, $11.6MM (-23.7%)
MidOcean Partners (2003):
$273.1MM, $250.5MM (91.7%), $87.9MM, $537.6MM (+114.6%)
Paul Capital VII (2004):
$100MM, $43.8MM (43.8%), $40.8MM, $49.2MM (+12.3%)
Paul Capital Top Tier II (2002):
$96MM, $55.7MM (58%), $49.6MM, $54.9MM (-1.4%)
Providence Equity Partners VI (2006):
$464.4MM, $0, $0, $0 (N/A)
Silver Lake Partners II (2004):
$100MM, $71.7MM (71.7%), $47.2MM, $47.6MM (-33.6%)
Silver Lake Partners III (2006):
$500MM, $0, $0, $0 (N/A)
Thomas Weisel Partners GGPII (2003):
$50MM, $28.1MM (56.2%), $30.1MM, $37.3MM (+32.7%)
Welsh, Carson, Anderson X (2005):
$200MM, $56MM (28%), $56.3MM, $56.3 (+0.5%)

You will note that Apollo VI isn’t calling capital at a very fast pace, at least not when compared to similar vintage funds at Blackstone and Welsh Carson. Over at CSFB, one can only assume that almost half of the 5.4% of total capital called there since 2005 is to cover management fees.

CPPIB has US$9.6B in commitments in total, of which US$3B is drawn (about 32%). The reported value (plus distributions) of that drawn portion is US$4.47B, representing a 47.4% gain.

European Funds

Advent Int. GPE V (2005 €):
$200MM, $59.1MM (29.6%), $56MM, $89.7MM (+51.8%)
Apax Europe VI (2005 €):
$200MM, $170MM (85%), $198.4MM, $244.1MM (+43.6%)
Coller Int. Partners IV (2002 US):
$75MM, $58.4MM (77.9%), $23.9MM, $63MM (+7.9%)
Coller Int. Partners V (2006 US):
$150MM, $7MM (4.7%), $6.3MM, $6.3MM (-10.0%)
KKR European Fund II (2005 €):
$188MM, $101.1 (53.8%), $105.6MM, $105.8MM (+4.6%)
PAI Europe III (2001 €):
$100MM, $97.7 (97.7%), $122.1MM, $191MM (+95.5%)
PAI Europe IV (2005 €):
$200MM, $104.2 (52.1%), $101.7MM, $115.6MM (+10.9%)
The Candover Fund UK (2001 €):
$100MM, $98.6MM (98.6%), $85.7MM, $144.6MM (+44.6%)
The Candover Fund US (2005 €):
$150MM, $58.4MM (38.9%), $56.1MM, $56.1MM (-3.9%)

When you look at the Coller International Partners IV figures (gain of 7.9%) you can only assume that there are some great latent gains in the 2002 fund for CPPIB to have doubled their commitment to the 2006 fund. But, as a collection of managers, the European list is doing very well: CPPIB has €3.6B in commitments in total, of which €1.4B is drawn (about 40%). But the reported value (plus distributions) of that drawn portion is €2.077B, a 47% increase!

And a hat tip to P.C. for the link.

MRM
(disclosure – our Fund II is one of the funds that received a commitment in 2004 from the TD Capital Legacy VC Fund of Fund when it was managed by Edgestone Capital Partners; we are pleased to have earned double digit net returns on a 3 year basis for CPPIB {indirectly} and our other LPs since our Fund II began investing in 2004)