Birch Hill lands the big fish

The CPP Investment Board Q4 data is out, and one of the wonderful pieces of news is that our friends at Birch Hill Equity Partners have landed the big fish! A $50 million direct LP commitment from CPPIB dated “2010”, but has been included in CPPIB’s list of funds as at December 31, 2009 under the slide “Funds Commitments“. CPPIB had provided an $85 million commitment to Birch Hill on their 2005 vintage Fund III, which currently shows a simple NAV return of 16.8% over the five year period, based upon GAAP accounting. Obviously, that figure is expected to grow over the coming years as their investments continue to mature.

If you pay attention to such things via our backwater blog, you’ll know that other than Onex, CPPIB has been assiduous in its efforts to avoid making direct commitments to each and every Canadian-based PE and VC General Partner since 2006. For the past several years, the story has been than it “didn’t move the needle” for CPPIB to make such obstensibly small commitments to domestic funds; for an investment to be relevant to CPPIB, it had to be in the $300-500 million plus range. Per fund management firm.

That was the primary driver for the creation of the 2006 vintage $400 million fund of fund program for Canadian VC and PE general partners, administered by NorthLeaf (formerly TD Capital Private Equity Partners). That $400 million fund program has put $179 million to work over the past four years, according to CPPIB Q4 data; more likely remains committed but still undrawn. That fund was essentially re-announced in February with a “re-up”, and what is understood to be the same mandate as the 2006 version.

The Birch Hill news will come as a happy surprise for all of the Canadian GPs who’d though the chance of a direct CPPIB commitment was long since dead. Other Canadian GPs who had CPPIB as a lead investor in their most recent fund include: Celtic House, Clairvest, Edgestone Equity Partners, Edgestone Venture Partners, Lumira, Ventures West. Most of which are in the market on their next fund now, or in the very near future.

The line-up outside CPPIB’s Yonge Street offices will start early tomorrow morning, with next week’s CVCA annual general meeting serving as the perfect crescendo to the lobbying that will now invariably restart after several parched years.

For Birch Hill, which announced their first close of $425 million last November, this apparently recent — but incredibly important — $50 million commitment likely means that they are in good shape to reach their $850 million Fund IV fundraising target.

Hearty congrats to them.

MRM
(hat tip A)