CPPIB Canadian general partner Q4 2009 performance numbers

The 4th quarter CPP Investment Board results are out for the world of private fund managers. Apologies about the delay, but things have been busy.

What changed this quarter, at least on first look, is that many funds had their vintage years change. At least five recognizable Canadian funds were moved a year later (Edgestone I is now 2001, Edgestone Mezz is now 2001, Skypoint is now 2002, TriCap Restructuring II has both changed its name and become a 2007 fund, VW 8 is now 2004); wonder what impact that’ll have on their return profile. Better or worse? Or is this another data entry error (see prior post “Did CPPIB really make US$4.2B on TPG IV?” Feb 17-10)?

This post is the latest in the ongoing series covering the Canadian general partners that have been lucky enough to receive a limited partner commitment from the CPP Investment Board (see prior post “CPPIB Canadian general partner Q3 2009 performance numbers” Feb 15-09). For the first time in twelve consecutive quarters, Canada’s very own national pension fund made its first new direct formal commitment to a Canadian-based general partner (other than Onex Corp) with a $50 million vote of confidence for Birch Hill Equity Partners’ new fund (see prior post “Birch Hill lands the big fish” May 20-10). CPPIB committed $85 million to their 2005-vintage Fund III.

It also appears that Tricap is no more as the new firm name of “Brookfield Special Situations” is now managing the 2001 and 2007-vintage Tricap funds I and II.

Despite a blizzard of 18 U.S. and international GP commitments during 2008, 2009 was quieter for John Breen and his team. For 2009, we saw two new foreign funds in Q1, none in Q2, one in Q3 and what appear to be three in Q4.

In total, 46 of the last 48 direct GP commitments have been outside of Canada. During a Thursday morning panel at last week’s annual CVCA conference, the delightful CPP Investment Board EVP Mark Wiseman explained that CPPIB needs to put a “minimum of $75 million” into a fund of “at least $750 million” given the scale of CPPIB’s investment program. As such, there is no way to do the “smaller” commitments that the previous CPPIB management team had done in the first half of the CPPIB’s life. Mr. Wiseman said that was why they’d set up the $400 million Canadian fund of fund program in 2006 via TD Capital Private Equity Partners, and recently reloaded with NorthLeaf for the same mandate.

The interesting thing about the $400 million figure is that between 2001 and 2006, CPPIB committed $398.5 million in $25, $30, $40 and $50 million chunks to such firms as Celtic, Clairvest, Edgestone Mezz, Kensington, Skypoint, Ventures West. Is $400 million going to be enough if (i) our economy has grown since 2006, (ii) this is to include the $150MM that was formerly dedicated to VC via its own fund of fund, (iii) many Canadian PE funds are raising larger sized funds, and (iv) new fund managers are popping up as well?

Some fund managers muttered in the Westin Hotel hallways that CPPIB had already broken this “minimum $75 million” rule with last quarter’s $50 million direct commitment to Birch Hill IV. As sincerely delighted as everyone is about the new 2010 Birch Hill commitment, the thing about being audibly proud of the “transparency” of their numbers is that CPPIB is also going to have to try to find a way to have a consistent story about their investment strategy as well.

If you are a regular visitor to the site, you’ll know that we pull out the figures showing the performance results that the Canada Pension Plan Investment Board is receiving from its GP relationships (they’ll want me to remind you that’s calendar Q4, not CPPIB’s fiscal Q4).

As we’ve done in the past, I’ve added our own Wellington Financial Fund II returns (as at Q4/09) as they get muddled when included as part of the CPPIB Legacy VC fund of fund program that committed $10 million in December 2004 (back when Edgestone ran the program for CPPIB) to our $83MM Fund II. I’ve also stripped out the returns that we provided to that fund to see how it did without our profits baked in (the Fund of Fund’s loss increases from -38% to -43%). Fund II ceased pursuing new transactions in August 2006 with the first closing of our $150MM Fund III that month (because our targeted financial returns aren’t “venture capital” like, we didn’t fit the GP profile sought by NorthLeaf’s VC fund-of-fund program).

One can take some pride that our Fund II improved the CPPIB’s Canadian VC Fund of Fund’s entire return by 5%, even if we aren’t shooting for 30% gross IRRs. CPPIB’s Mark Wiseman implied to 600 people in Ottawa that his Mother is the toughest LP in the world, so I’m glad we’ve enhanched her pension…if only just a tiny bit.

Given the talk of transparency last week, I thought it would be only fair to put out our Fund III numbers. To remind, our funds are recirculating in nature (read: LP friendly), so we keep the overall fund size smaller and between a capital call line and deal exits, we’ve been able to lead $174.5 million worth of transactions via 31 deals in our $150 million Fund III, but only have half of our capital drawn as of Q4.

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). That figure is based in large part on what the manager believes the portfolio is worth as at Dec. 31, 2009, subject to GAAP fair value accounting. MM means millions. “Home” currency.

Canadian Venture and Life Science Funds

Celtic House VP Fund II (2002 US$):
$13.5MM, $15.1MM (112%), $11.6MM, $23.8MM (+58%)

Celtic House VP Fund III (2005 US$):
$50MM, $32.7MM (65%), $22.3MM, $23.2MM (-29%)

Edgestone Venture Fund (2001):
$50MM, $45.1MM (90%), $16.2MM, $63.6MM (+41%)

Edgestone Venture Fund II (2004):
$50MM, $45.8MM (92%), $29.2MM, $30.5MM (-33%)

Lumira/MDS Life Sciences Technology Fund II (2002):
$200MM, $112.9MM (56%), $52.3MM, $113.1MM (+0%)

Skypoint Telecom Fund II (2001 US$):
$25MM, $23.3MM (93%), $7MM, $10.8MM (-54%)

TD Capital Legacy VC Fund (2002):
$82MM (originally $100MM), $66.9MM (82%), $30.7MM, $41.8MM (-38%)

TD Capital Legacy VC Fund (2002)
ex-Wellington’s Fund II investment:
$72MM, $61.3MM (85%), $24.5MM, $34.8MM (-43%)

Ventures West 8 (2004):
$50MM, $42.1MM (84%), $29.1MM, $31.2MM (-26%)

Wellington Financial Fund II (12/04):
(CPPIB participated in our $83MM Fund II via a $10MM commitment when Edgestone managed the what’s now called the “Legacy VC Fund”)
$83MM fund size, $56.3MM (68%), $0.75MM, $69.6MM (+24%)

Wellington Financial Fund III (2006):
$150MM fund size, $74.9MM (50%), $76.5MM, $90.6MM (+21%)

Canadian Buyout and Other Funds

Birch Hill Equity Partners III (2005):
$85MM, $84.7MM (99.6%), $91.8MM, $98.9MM (+17%)

Birch Hill Equity Partners IV (2010):
$50MM, $0MM (0%), $0MM, $0MM (0%)

Brookfield Special Situation I (2001):
$150MM, $187.1MM (125%), $36.6MM, $260.2MM (+39%)

Brookfield Special Situation II (2007):
$300MM, $330.8MM (110%), $261.1MM, $353.4MM (+7%)

Clairvest Equity Partners I (2001):
$50MM, $46.8MM (94%), $14.3MM, $73.1MM (+56%)

Clairvest Equity Partners III (2006):
$40MM, $26.1MM (65%), $22.4MM, $21.8MM (-16%)

Edgestone Equity Fund II (2002):
$100MM, $87.5MM (88%), $41.2MM, $115.1MM (+32%)

Edgestone Equity Fund III (2006):
$100MM, $63MM (63%), $31.7MM, $48.7MM (-23%)

Edgestone Mezzanine Fund II (2000):
$30MM, $29.3MM (98%), $0MM, $27.7MM (-6%)

Kensington Co-investment Fund (2002):
$40MM, $42.4MM (106%), $9.9MM, $54.6MM (+29%)

Onex Partners (2003 US$):
$150MM, $140.5MM (94%), $140MM, $348MM (+148%)

Onex Partners III (2008 US$):
$400MM, $29.5MM (7%), $22.3MM, $22.3MM (nmf%)

TD / CPPIB CDN Private Equity Holdings I (2006):
$400MM, $179.4MM, (45%), $135MM, $144.3MM (-20%)

TD Capital CFOF Legacy Buyout (2002):
$121MM, $113.9MM (94%), $70.4MM, $126.4MM (+11%)

MRM