With investors looking for new ways to redistribute Capital, the Canada Pension Plan Investment Board (CPPIB) is expected to join Luxembourg-based CVC Capital Partners’ latest EUR 5bn fund.
According to a report from the Financial Times (FT), this move by CPPIB sheds light on how investors are being pressured to deploy capital even with a less than 20% internal rate of return.
“A low-interest rate environment has made it harder for investors to hit their historical targets, leading them to back funds with lower return thresholds,” the report said.
The new fund is also targeted to keep stakes in European and North American firms for a longer period of time than CVC has in the past. Citing people with knowledge of the matter, FT said the fund has a target of EUR 4bn, with a maximum capital amount of EUR 5bn.
Other investors in the fund include Singapore’s GIC, Kuwait Investment Authority and the Hong Kong Monetary Authority. Canadian pension fund PSP Investments is also expected to inject some capital into the fund.
“CPPIB joining this fund is a very good barometer of market interest in the future,” a person with direct knowledge of the fundraising told the FT, “Investors are getting their money back too quickly from traditional funds. They want their capital deployed constantly.”
The fund pegs a 15% investor rate return and will hold firms for up to 12 years, a change from the usual five-year period. It will be on the hunt for assets which are believed to be steady generators of cash.