The Ontario Teachers' Pension Plan is reportedly considering selling some of its private equity holdings, according to reports. Photo by Cole Burston /The Canadian Press.
Ontario Teachers' Pension Plan (OTPP) is exploring the sale of a $1.5 billion private equity portfolio in a bid to generate cash for future investments. According to sources familiar with the matter, the fund is working with Jefferies Financial Group to gauge potential buyer interest. The discussions, still in the early stages, have not yet been confirmed publicly, and both OTPP and Jefferies declined to comment.
The OTPP, which manages a massive $255.8 billion in assets, holds around $58.5 billion in private equity investments as of June 30. However, the fund’s private equity assets underperformed last year, yielding a return of just 3.6%, falling short of the benchmark return of 16.3%. This underperformance may be a contributing factor to OTPP’s decision to reconsider its private equity holdings.
The sale of private equity stakes is part of a growing trend among institutional investors looking for liquidity in what has been a challenging environment for deal-making. As the economic climate slows, many limited partners (investors in private equity funds) are seeking to offload some of their private equity stakes. In fact, last year saw an increase in secondary market sales of private equity portfolios, growing from $53 billion in 2022 to $60 billion in 2023, according to PJT Partners, a major investment banking firm.
Private equity secondaries are becoming a common route for institutions like OTPP to manage their portfolios more actively. By selling off portions of their stakes, pension funds can free up capital, allowing them to invest in other areas with potentially better returns or emerging opportunities. The trend has been spurred on by a market where new deals are increasingly hard to come by, leading to fewer opportunities for growth in private equity investments.
Although the talks are still preliminary, the potential sale marks an important move by one of Canada’s largest pension funds. With over 330,000 active and retired members relying on OTPP, ensuring steady returns is crucial for the fund’s long-term success.Given the current landscape for private equity, OTPP’s decision to reevaluate its stake in this asset class may signal a broader shift in strategy. As institutional investors grapple with changing market conditions, decisions like these allow them to adapt and remain financially strong. For OTPP, selling a portion of its private equity holdings could pave the way for more flexibility and investment in other profitable ventures.
