Canadian pension funds, long recognized as major global investors in private equity, are currently realigning their investment approaches within this asset class. The Canada Pension Plan Investment Board (CPP), among others, is transitioning from a primary focus on direct buyout strategies toward expanded use of external management teams and co-investment opportunities. This strategic redirection comes amid heightened market volatility, valuation challenges, and evolving risk considerations.
Caitlin Gubbels, CPP's Global Head of Private Equity, outlined these changes in a recent discussion. She observed that, during 2020 and 2021, the private equity sector exhibited a "lack of discipline" in deal-making. This period was marked by rapid shifts in economic conditions, including a swift rise in interest rates that adversely affected business valuations. Such developments constrained the board's ability to deploy capital effectively, resulting in what Gubbels described as private equity portfolios "treading water" over the past five years.
Compounding these difficulties were external factors such as increased tariffs introduced under President Donald Trump's administration, which contributed to a broader market downturn. Nevertheless, emerging themes such as the growing prominence of artificial intelligence (AI) technologies have opened new avenues for investment. Retail investors have also found private markets increasingly attractive, signaling a diversification of capital sources within this sector.
Reflecting on the market's evolving complexity, Gubbels stated, "If 2025 has taught us anything, it's that nothing is certain anymore." She characterized the current environment for private equity investors as "tricky" and emphasized that challenges are intensifying.
In parallel with CPP's strategic evolution, other major Canadian pension plans are adopting similar approaches. In 2024, the Ontario Municipal Employees Retirement System (OMERS) ceased making direct private equity investments in Europe, opting instead to invest alongside partners and third-party fund managers. Earlier in 2025, the Caisse de dépôt et placement du Québec (CDPQ) reduced its ownership stakes in private companies, while the Ontario Teachers' Pension Plan expressed an intention to increase strategic partnerships in its private equity endeavors.
According to research by global think-tank New Financial, 22 percent of public pension fund assets are allocated to private equity. As of September 30, 2025, CPP had approximately one-fifth of its C$777.5 billion (approximately $559 billion) in private equity holdings. The fund's private equity portfolio generated an 8.7 percent return in the most recent fiscal year, with a five-year annualized average of 14.7 percent.
To enhance portfolio performance, CPP has restructured some private equity holdings within its Integrated Strategies Group (ISG). This platform is designed to extend investment capabilities beyond traditional departments, enabling the fund to hold, manage, and make investments with a wider strategic mandate. The pension fund's website notes that ISG currently includes substantial ownership interests in two reinsurance firms, Ascot and Wilton Re, along with a significant minority position in agribusiness solutions provider Bunge.
The shift in focus also involves an increased appetite for passive co-investments. CPP is actively seeking to increase allocations in this area, acknowledging the potential for augmented returns and risk mitigation through diversified, collaborative investment vehicles.
In recent announcements, CPP declared a commitment to invest an additional C$750 million (about $540 million) through its Canadian mid-market program, which is managed by Northleaf, a global private markets investment firm. This mandate targets small and mid-sized Canadian buyout funds, secondary investments, and direct co-investments focused on the domestic market. Bruce Hogg, CPP's Managing Director and Head of Integrated Strategies, emphasized the "compelling investment opportunities" in Canada and highlighted the longstanding, two-decade partnership with Northleaf as an effective mechanism for deploying patient, long-term capital into homegrown business ventures.
Further demonstrating this collaborative strategy, CPP and Northleaf recently completed a global secondary expansion. CPP invested approximately C$160 million (about $115 million) to secure exposure to a diversified portfolio encompassing mid-market funds and various companies within Northleaf's global private equity platform.
Together, these moves reflect a coordinated effort by leading Canadian pension funds to recalibrate their private equity strategies in response to evolving market dynamics. By increasingly favoring investments through external managers and structured co-investments, these funds aim to navigate complexity, preserve capital discipline, and position themselves for sustainable, long-term growth.