LP Profile: CPPIB –

Mark Weisdorf, a 46 year-old father of two, spends his very full weeks in Toronto helping to build one of the world’s largest private equity investment groups.

A typical day for Weisdorf, who heads up the private equity efforts for the Toronto-based Canadian Pension Plan Investment Board (CPPIB), includes a two-hour meeting with his team in which they discuss topics such as the group’s business plan, portfolio management, how to maximize returns and other issues centered on investments.

Then, twice a week, Weisdorf is in similar meetings with his peers from the public market group, talking about research, communications, law and finance as they review CPPIB’s work. When he’s not in those more formal meetings, Weisdorf is in informal discussions with his team colleagues or talking with funds-of-funds or GPs.

CPPIB is independent of the Ottawa-based Canadian Pension Plan (CPP), which was founded in 1966 to collect and manage funds withheld from the paychecks of Canadian citizens. Effectively, it is the equivalent of the social security administration of the United States. But CPP was established as a “pay-as-you-go,” rather than a “fully funded,” pension plan. This means that each generation has paid the pensions of the previous generation. By the mid-1990s, however, more money was going out in benefits than was coming in. As a result, CPPIB was conceived in 1996 to manage the plan and steer it away from a potential crisis.

One Master

CPPIB, while independent, has only one client, CPP, and it has an independent board of non-governmental auditors along with the responsibility to publish its results quarterly. It began receiving funds from CPP in 1999. These were invested in stock index funds. CPPIB expanded and entered the private equity market soon after Weisdorf came on board about two years ago. Based on cash flow projections, CPPIB will manage some $160 billion by 2013, making it one of the largest pension fund asset managers in Canada.

When it created the Investment Board in 1997, CPP decided to build a professional investment organization with separate groups of managers across all asset classes and expertise in both public and private equity investing. The group’s investments began modestly with a $1 billion pool of capital in 2001, with a mix of real estate, infrastructure and private equity (from venture capital to buyouts).

One of the outside professionals CPP turned to for advice about how it should develop its private equity investments was Weisdorf, who was an investment specialist at Nesbitt Burns in Toronto. Before that, Weisdorf had spent more than three years with HSBC Securities and 10 years in CIBC World Markets. Both positions, in retrospect, helped prepare him for his current role of helping to create what CPPIB plans as a world-class limited partner organization.

CPP clearly thought well of Weisdorf, so much so that he was retained to found and head the private equity group for CPPIB. It was, according to Weisdorf, “a big mandate,” and given with an extraordinary degree of latitude.

CPPIB was allowed, for example, the flexibility to manage funds as appropriate to provide the best returns. That is, if the market isn’t good for venture capital, CPPIB can shift money to buyouts, fixed income or distressed debt. In focusing on the total portfolio, Weisdorf and his colleagues in public markets have the freedom to shift funds across asset classes where appropriate. If venture capital is not likely to generate strong returns, Weisdorf and his team can shift their emphasis to real estate or another asset class.

To date, CPPIB has invested $5.3 billion in 34 private equity funds run by 29 general partnerships, including Advent International, Paul Capital, Lexington Partners and NIB. CPPIB’s total assets are headed toward $56 billion.

It had $18 billion (in all asset classes) under management last year, and it will get another $38 billion dollars from bonds and cash held by CPP over the next three years if changes to CPP’s legislation are confirmed. That would put the organization on the fast track to become as important a private equity player as TIAA-CREF or CalPERS.

Besides heading up CPPIB’s private equity investments, Weisdorf has made a name for himself outside of Toronto. As an attendee of a group called Limited Partners, Weisdorf was one of those who recognized that the group needed to formalize its gatherings and create a standing organization. “Over the course of the 1990s there were lots of new LPs and GPs who began to attend the meetings,” he says. “The informal atmosphere of the gatherings had to give way to a more formal dialogue.”

So, in the fall of 2000, attendees agreed to a formal agenda. At the fall 2001 meeting, attendees voted on proposals for organization and elected a board. Weisdorf was also one of the volunteers who, over the summer of 2001, developed a mission statement, a constitution, lists of committees and sub-committees for what has become the International Limited Partners Association (ILPA), an 80-member, not-for-profit organization.

That wide visibility and participation within the private equity community gives Weisdorf an informed perspective on his profession. Weisdorf, along with CPPIB, bears the weight of the obligation on behalf of the Canadian people. He is all too aware that come 2010 Canadian baby-boomers will start to retire and ask for their pensions.

Pressure To Perform

In talking about CPPIB, Weisdorf is the first to recognize that his organization is new. At the same time, CPPIB’s returns on public equities over the 2000-2010 decade will not match those of the 1980s and 1990s, and CPPIB’s private equity group bears the responsibility for making up for that slowdown. But investing by the private equity group began in 2001, so it’s just three years into building what will be a vast portfolio. Nonetheless, Weisdorf says that his group has a firm grasp on its direction and is constantly re-evaluating and balancing investments according to market conditions to shape its portfolio for success.

The key to portfolio development at CPPIB, Weisdorf says, is manager selection. To date the group has selected several venture fund managers: three in the biosciences (MDS Capital, MPM Bioscience and Schroeders), two Canadian managers in IT (Skypoint and Celtic House), and three managers in the United States (Carlyle, TWP and Paul Capital). These groups have had to demonstrate to the CPPIB’s satisfaction that they will succeed over the next decade. It’s not an easy task. Weisdorf has the satisfaction (and pressure) of knowing that his countrymen are counting on him to produce solid returns. After all, 2010 is not as far away as it once was.