Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), which has rapidly built a strong presence in India as an institutional investor, has partnered with UK’s Generation Investment Management LLP to invest in sustainable businesses globally with ‘patient capital’.
Both firms plan to make an initial investment of $3 billion for the venture and back companies for much longer than typical private equity firms with a holding period of 8-15 years, they said on Tuesday. PE firms usually look to exit after 3-5 years.
Generation Investment is headquartered in London. The firm was co-founded in 2004 by former US vice president Al Gore and Goldman Sachs Asset Management's former head David Blood.
The CDPQ-Generation partnership also announced their first investment, taking control of UK-based FNZ, a fintech firm engaged in financial services and wealth management services.
In a secondary deal, CDPQ-Generation acquired a two-thirds stake from private equity firms General Atlantic and HIG Capital. The deal values FNZ at $2.2 billion (£1.65 billion), making it among the largest fintech deals this year.
In a statement, Blood said that his firm has worked to prove the business case for long-term sustainable investing across both listed and private equity markets.
"This partnership affords us the opportunity to deploy longer term capital...This is not only an important stride in fulfilling our own mission at Generation, but one that we hope will catalyse a more sustainable form of investing in the capital markets," Blood said.
CDPQ is a long-term institutional investor that manages funds primarily for public and para-public pension and insurance plans. It invests globally in major financial markets, private equity, infrastructure, real estate and private debt.
The firm, the second-largest pension fund in Canada, managed more than 308 billion Canadian dollars’ worth of assets as of June 2018.
Generation Investment managed more than $20 billion worth of assets as of June this year.
Since it officially set foot in India in 2016, CDPQ has invested $4.5 billion across sectors such as infrastructure, real estate, stressed assets and renewable energy, among others, in partnership with the likes of Edelweiss Group, Piramal Enterprises and Kotak Mahindra Bank.
In late-2017, VCCircle reported that the pension fund’s direct India investment portfolio had crossed $500 million (around Rs 3,235 crore) just one year after beginning to invest in India.
VCCircle reported in May this year that India's share in CDPQ’s portfolio may triple in the next few years.
Emerging markets is the firm’s new theme and it places India on a much higher pedestal than its peers, CDPQ’s chief executive Michael Sabia told VCCircle in an interview earlier this year.
While larger pension fund Canada Pension Plan Investment Board (CPPIB) has invested far more in India, CDPQ is rapidly catching up. Besides making direct investments, it is also a limited partner in a Kedaara Capital fund and Tata Power-ICICI Venture’s Resurgent India fund.
In May this year, CDPQ agreed to acquire a 40% stake in power producer CLP India Pvt. Ltd for Rs 2,640 crore ($365 million) in cash.
In March, CDPQ backed Fundamentum, a technology fund launched by technocrat Nandan Nilekani and investor Sanjeev Aggarwal.
CDPQ’s other investments include its debut deal in September 2016 when it invested $75 million in renewable energy company Azure Power Global Ltd. The following month, CDPQ agreed to invest $155 million (more than Rs 1,000 crore) in Chennai-based TVS Logistics Services Ltd by buying the stake held by Goldman Sachs and KKR.