TORONTO: Ontario Teachers Pension Plan is overhauling its approach to investing in private equity after the US$200bil asset manager booked its first loss on that portfolio in 16 years.
After the value of its private equity holdings dropped by about C$10bil (US$7.4bil) in 2025, the Canadian firm said it will shift its focus in that business to just three sectors: financial services, technology and services.
The overall fund still generated a 6.7% return last year, thanks to the rising value of stocks, gold and its investment in Elon Musk’s SpaceX.
The troubles in its private equity business are the latest reminder of the challenges facing the industry, which is sitting on US$3.8 trillion of unsold assets and struggling to raise money for new funds.
Ontario Teachers said it felt it had to lower the valuations it assigned to some of the assets in the private equity portfolio to reflect the broader environment.
“We saw adjustments in software with the artificial intelligence uncertainty, and we saw adjustments in healthcare that just had to do with likely an overbuy in the market through a given period that just created more vintage risk,” Gillian Brown, chief investment officer for public and private investments, said in an interview.
“I think outside of that, you’re really talking about more idiosyncratic.”
The change means the pension plan no longer has specific teams focusing on healthcare investments and the sustainable energy transition within that unit, according to its website.
“We felt before we were too broad,” chief executive officer Jo Taylor said in the interview.
“I wouldn’t honestly say the three that we have today are going to be the only ones we have forever – this is just a for-now type question.”
The value of Ontario Teachers private equity holdings totaled C$50.8bil at year-end.
While the executives declined to identify companies that were marked down, Taylor said the pension plan lowered valuations for some investments made in the wake of the pandemic.
Assets in the fund’s private equity portfolio include dental support firm Abano Healthcare, eye-care services provider Nvision and PhyMed Healthcare Group.
Ontario Teachers acquired a majority stake in software maker Miratech in 2021 in a deal that valued the firm at more than US$1.5bil.
In December, Miratech secured a US$2bil loan from private credit firms led by Blackstone Inc to refinance a bank loan package.
The pension plan will continue using external fund managers within private equity, with Jeff Markusson leading the effort as senior managing director of global funds.
Third-party funds account for 28% of the private equity portfolio, with direct investments making up most of the rest.
The private equity team has undergone other changes over the past year, including the appointment of Dale Burgess as head of equities and the addition of a department focused on value creation.
Harj Shoan, senior managing director for sustainable energy transition and head of global funds, left the firm, and at least five other senior managers from that unit have departed over the past several months.
Canada’s largest pension plans are re-evaluating their private equity play books amid rising macroeconomic uncertainty and a difficult climate for deal exits.
Ontario Municipal Employees Retirement System, which posted a 2.5% loss for its private equity investments last year, revamped that unit over the past two years, including hiring a new global head, halting direct buyouts in Europe and cutting a team focused on the asset class in Asia.
“We want to be actively investing in private equity,” Taylor said.
“But we have to be self-aware and say, ‘What are we good at and where do we want to spend more of our time and capital going forward?’” — Bloomberg
