Banff – Kick It Up a Notch

Reflections on the Canadian market following a trip to the CVCA’s annual conference in Banff

One after another, the Canadian private equity pros who entered Privcap’s pop-up studio at the Fairmont Banff Springs Hotel had the same question: Why is there a bed in here?

Not to worry! The bed was merely evidence of Privcap’s ability to capture content just about anywhere, including in a fully-furnished hotel room one floor above the annual meeting of Canada’s Venture Capital & Private Equity Association (for the record, the camera and lights were at all times trained on a chair with a black backdrop).

Indeed, anywhere private capital people gather, Privcap might be there to record their expertise. It’s been a busy month in that regard – we’ve traveled up and down the Western Hemisphere to shoot interviews and panel discussions with people you might invest with.

Our recent production days in Sao Paulo, Mexico City, Washington DC, New York and Banff have produced a huge cache of intellectually stimulating videos.

(I’m lying about Mexico City – in fact dozens of Mexican private equity pros came to NYC in May on a promotional trip and we interviewed many of them at the Waldorf. But this was almost like going to Mexico City).

It was good to be back at the CVCA event. Two years ago, Privcap shot its first videos in Vancouver (we had no idea what we were doing then!) and we were kindly invited back this year to capture content in a private room at the Banff Springs, a giant castle perched high in the Canadian Rockies that for three days was occupied by Canadian private capital folks and international visitors who want to manage Canadian money.

The Americans in attendance observed that it was strange to see snow in late May. Not so, said the locals.

Welcome to Banff.

The Canadian market is interesting for two main reasons – Canada is in and of itself a substantial market, with companies that increasingly must act on global stage but are often undercapitalized. Canada is also the Saudi Arabia of institutional long-term capital. A handful of pension funds like OMERS and CPPIB are directly deploying capital around the world and, as Siguler Guff’s Drew Guff and I discussed in a recent interview, generating envy among pension funds south of the border due to their fiduciary independence and non-reliance on third-party GPs.

Two years ago, the general attitude among GPs and gatekeepers toward Canada’s pension DIY trend seemed to be incredulity and resignation – “I can’t believe you won’t be investing in my next fund, but hey – do what you gotta do.”

Two years later, that attitude seems to have morphed into: “Attention LPs – do not try Canada at home! You are not equipped to be OMERS! You will only embarrass yourself!”

The naysayers may have a point. Groups like OMERS are not actually themselves pension funds, but private institutions with a public charter to invest on behalf of the pension funds. Groups that are themselves pension funds face political and public-perception challenges in building true direct-investment teams. Yes, state governments have an easier time paying college football coaches $1 million per year because the benefits of a home team victory are more apparent than the benefits of reducing fee-drag over a 15-year time horizon on behalf of public school teachers.

As one Canadian pension executive told me, if you can’t compensate investment staff with market wages and incentive pay approximating carried interest, don’t even try to directly invest.

Some highlights from our Banff sessions to look out for in the next few months on Privcap.com:

• Jim Fasano of CPP Investment Board has a high-class problem – the pension has so much capital to put to work, and is growing so quickly that the private markets team has had be very innovative in creating new investment platforms. Among these – a revamped fund-investment effort, a sort-of GP incubation program and a mid-market co-investment capability. At its current pace, will CPPIB eventually be the biggest private equity investor in the world?
• John Greenwood and Greg Little from Pantheon Ventures described their firm’s approach to vetting venture capital funds, which more so than buyout funds involves a process of measuring the influence that individual venture capitalists wield in their markets, as well as the ability to spot very, very big ideas.
• John Ruffolo of OMERS Ventures discusses the firm’s evolution from passive pension to direct venture investor

Stay tuned!