Seven weeks after Welsh Carson sale, CPPIB Secondaries Head departs

Seven weeks after selling our interests in private equity behemoths PAI and Welsh, Carson, Anderson & Stowe to Harbourvest (see prior post “Why did CPPIB sell our stakes in buyout firms PAI and Welsh, Carson & Stowe?” May 31-15) as part of a $1.5 billion deal, AltAssets reports that Yann Robard, CPP Investment Board’s Head of Secondaries & Co-Investments, is leaving at the end of the month. According to CPPIB’s website, Mr. Robard is a Dalhousie grad and had previously worked at Paul Capital Partners in private equity, with a turn at CIBC World Markets and JP Morgan Chase. Mr. Robard joined in 2001, which would make him the longest-serving member of the 61-strong senior CPPIB management team.

There can be only three likely reasons why he’s leaving what is arguably the best job in the world for anyone in the secondary and co-investment business: I) he was lured away with a very attractive offer, II) he was pushed out, or III) he has personal, health or family reasons for wanting to spend a year or three “on the beach” after a long career in the capital markets. I suppose we’ll know soon enough if it was either of I (should he show up gainfully employed somewhere else post Labour Day, after a five week summer break) or III (should there be a sighting this December of Mr. Robard training in Hawaii, say, for the International Ironman competition).

If neither of those two things happen come December, CPP beneficiaries are left to speculate that our longest-serving senior manager was pushed out of a key role, overseeing billions of dollars of transactions over the past number of years. Which turns the mind to the recent US$500 million Welsh, Carson secondary sale. As I wrote seven weeks ago, we inexplicably sold a stake in a fund which had produced a 14% IRR according to data published by the California State Teachers Retirement System (CPPIB refuses to disclose such information). I say “inexplicably” since CPP’s target return is inflation plus 4%, and both of Welsh Carson’s X and XI funds had beat that hurdle rate. Moreover, Welsh Carson XI has performed better than 36 of the 54 trackable LBO funds that CPPIB has put our money in (see prior post “How many of CPP’s Private Equity Funds Are Underperforming Bonds?” May 28-15). If dumping decent PE funds doesn’t make sense to you, particularly when fresh capital flows into the plan each and every week from payroll deductions (which means we didn’t need the Welsh money to redeploy elsewhere), perhaps it was equally surprising to CEO Mark Wiseman or some of CPP’s board members (such as the respected Douglas Mahaffy) when the news became public.

According to CPPIB’s press releases and public utterances, you’d assume that we’ve never done a bad co-investment deal — at least not one that’s “material” to the overall investment program. I say that a bit tongue-in-cheek because we’ve pointed out more than a few of them in this space over the years, including EMI (went bankrupt in 2011), Freescale, SunGuard, TXU (see prior post “12 questions CPP Investment Board won’t be answering on BNN today” Jan. 17-13) and CHC. In a slap at the transparency Gods, CPPIB’s media spindoctors only ever talk about our Skype flip and similar investment successes (see representative prior post “CBC falls prey to CPPIB’s spin doctors” Jan. 8-13). Based upon the public positioning of the program’s positive results, we should have bent over backwards to keep Mr. Robard as the head of what we are told is a wildly successful global co-investment program. His 14 years of institutional knowledge was likely an important counterweight to the majority of CPPIB’s leadership, who are largely very recent hires.

Which makes it all the more curious when senior folks depart Canada’s largest capital pool in the wake of a $1.5 billion transaction that, to an outsider anyway, didn’t compute. This is a great opportunity for CPPIB to truly earn that seat on the Board of the Canadian Coalition for Good Governance.

Given the conflicting signs, we deserve some real insight into what’s going on with our business.

MRM
(disclosure – this post, like all blogs, is an Opinion Piece)