Shakeout in private equity weeding out weaker players, says Canadian pension fund chief
PRIVATE equity is undergoing a “structural transformation” where returns are being compressed and a process of “natural selection” is weeding out weaker players, said Charles Emond, president and chief executive of Canada pension investment firm La Caisse.
La Caisse’s portfolio comprises C$496 billion in assets, invested on behalf of 48 pensions and insurance funds and benefiting more than six million people in Quebec, Canada.
As at end-December 2024, equities’ share of asset allocation was at 44 per cent or C$219.4 billion comprising public equities (C$129.4 billion) and private equity (C$90 billion)
As a percentage of total assets, PE’s share was 18 per cent at end-2024. Emond said: “I think there is a structural transformation under way; it’s been very crowded. And in the last few years, I’ve not seen as much capital coming back to the limited partners (LPs).
“We had great returns around 2021 and most of the big pension funds like ourselves found themselves over-allocated. It broke a cycle; it was difficult to reinject into the additional funds being raised by general partners, who on top of that didn’t have much capital being recycled. Obviously the bigger names will prevail.”
Based on Preqin data, 2024 was a challenging year both for PE fundraising and returns. In 2024, some US$661.7 billion was raised by 1,382 funds, compared to 2023 when a record US$836.4 billion flowed into 1,680 funds. Over 12 months to end-March 2025, PE generated returns of 7 per cent.
Pitchbook data up to September 2025 shows that global PE fundraising and deal activity have improved this year, but are a far cry from the peak performance of 2021.
Emond said: “PE returns are highly driven by interest rates. In a situation where you can’t generate the bulk of returns by financial engineering, it comes down to asset selection and having strong companies and fundamentals that are strong and growing… We remain quite committed with the large PE firms.
“Once you reach the allocation limit for the asset class that our clients want, we need to reassess our model. How do we sell and redeploy assets in a proportion that keeps our allocation where it should be?”
The return premium from private assets is being compressed, he said. “The premium is still sufficient, but we have to be vigilant. Some things play to our advantage and help to compensate. Our size is such that if we were to bid for an infrastructure asset with a large ticket, there would be few competitors, and that helps us.”
Fixed income accounts for 31 per cent of total assets, or C$154.3 billion, of which C$102 billion is invested in credit. Within credit, 65 per cent is in private debt which the firm is keen to expand.
“Fixed income may hurt you when rates go up, but now it’s a great generator of performance. We’ve managed to secure loans at a fairly significant coupon. Today our yield to maturity just sitting on our hands is generating 6 to 7 per cent.”
