Private Equity
Private equity is the ownership of equity or equity-like securities in companies that do not trade publicly. OMERS Capital Partners (OCP) manages OMERS investments in privately-held companies. Private equity is a relatively new asset class for institutional investors, and is expected to grow rapidly in the next decade as private companies seek financing.
These types of investments appeal to OMERS because they tend to generate higher long-term returns than public equity portfolios over time and are generally held for five to seven years. Historically, OMERS participated in private equity through limited partnerships managed by external firms however, moving forward our approach will be toward more direct investment.
Our private equity investment strategy takes two forms. One involves investing as a limited partner in a fund managed by external specialists, who have demonstrated the ability to consistently outperform their peers over time in selecting investee companies.
Generally, the relationships that we establish also permit a co-investment strategy, whereby we can make an additional direct investment in an investee company alongside the investment being made by the partnership.
Our second private equity strategy involves direct investments with other institutional investors, with OMERS staff identifying the opportunities, conducting the due diligence, structuring the transaction and generally leading or co-leading the investor consortium. These investments are generally less than $200 million and exclude early stage venture capital commitments.
As at December 31, 2004 about 4.0% of the total net investment assets were invested in private equity, with 50% managed by approximately 40 external fund managers in Canada, the United States and Western Europe. The remaining 50% is directly invested in companies.
Our goal is to build a diversified private equity portfolio by geographic market, economic sector and types of companies that, over the next few years, will increase our investment in this asset class to approximately 10% of the total Fund.