Pensions and stuff

Canadian pension funds are redefining their investment strategies as they increasingly exit buyout funds in favor of private credit, driven by reduced deal flow in traditional markets. This shift highlights a strategic pivot to mitigate risks related to economic volatility and rising interest rates, with potential implications for the future of investment liquidity as significant players like Ardian facilitate these transitions.

Tracking: Pensions

Geography: United States, Europe, Canada

1. Canadian pensions increasingly exit buyout funds as private credit grows

Canadian pension funds, notably the Maple Eight, are pivoting towards private credit, increasing allocations amid market changes. Ardian, a French asset manager, has emerged as a significant buyer of private equity stakes, facilitating liquidity for these institutional investors. In 2023, Canada's largest pension fund sold $2 billion in stakes to Ardian, with British Columbia Investment Management Corp. following with $1 billion in 2024. This shift is largely attributed to a lack of deal activity in traditional markets, prompting a focus on private credit and secondary markets. With private credit assets projected to surpass $2 trillion by 2026, pension funds are strategically adjusting their portfolios to mitigate risks associated with economic volatility and increased interest rates.

Key facts:

- Maple Eight pensions are increasing their allocation to private credit.

- $2 billion in stakes sold by Canada Pension Plan Investment Board to Ardian in 2023.

- Private credit assets are expected to exceed $2 trillion by 2026.

Why it matters: The pivot to private credit offers pensions enhanced returns in a low-deal climate, but increased reliance raises liquidity concerns for future capital commitments.

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