Key Takeaways
- • CPP Investments CEO John Graham stated the pension fund would need to fundamentally rethink its private equity strategy if general partners began charging fees on co-investments, signaling the institution's strong preference for the traditional no-fee co-investment model.
- • Large institutional investors like CPP Investments have historically accessed marquee private equity transactions on a fee-free basis, relying on co-investment opportunities as a core component of their active management partnership model to reduce overall fee drag.
- • CPP Investments maintains approximately C$2.6 billion in private equity commitments and has announced plans to ultimately invest up to 10 percent of its assets in the sector, making co-investment fee structures material to its capital deployment strategy.
- • The pension fund's resistance signals broader institutional investor concerns about margin compression in private equity co-investing; any widespread adoption of co-investment fees by GPs would pressure returns and alter the economics of large institutional PE relationships.
Summary
CPP Investments, Canada's largest pension fund, has made clear its opposition to paying fees on private equity co-investments—a structural shift that would fundamentally alter how the institution deploys capital alongside buyout firms. According to Leo Kolivakis, publisher of Pension Pulse, CPP Investments CEO John Graham stated the fund would have to reconsider its entire private equity strategy if general partners began imposing fees on co-investment opportunities, though he expressed doubt that such a practice would materialize industry-wide.
The co-investment model has been a cornerstone of CPP Investments' active management approach since 2006. The fund invests in private equity funds but expects access to marquee transactions on a fee-free basis as a key benefit of partnership with established general partners. This arrangement reduces fee drag—a significant consideration for large institutions managing billions in capital. CPP Investments' current private equity exposure stands at approximately C$2.6 billion, with the fund having announced plans to eventually allocate up to 10 percent of total assets to the private equity sector, making the structure of co-investment arrangements economically meaningful.
Large institutional investors have for decades relied on fee-free co-investment access as a standard market practice, particularly with flagship transactions where GPs secure access to high-quality deal flow. Any systematic shift toward charging co-investment fees would compress returns and alter the competitive dynamics between asset owners and private equity sponsors. Graham's explicit statement—that CPP Investments would fundamentally reassess its PE strategy under such conditions—represents a clear negotiating position and reflects broader institutional investor concerns about fee inflation in private equity markets.
The co-investment model has been a cornerstone of CPP Investments' active management approach since 2006. The fund invests in private equity funds but expects access to marquee transactions on a fee-free basis as a key benefit of partnership with established general partners. This arrangement reduces fee drag—a significant consideration for large institutions managing billions in capital. CPP Investments' current private equity exposure stands at approximately C$2.6 billion, with the fund having announced plans to eventually allocate up to 10 percent of total assets to the private equity sector, making the structure of co-investment arrangements economically meaningful.
Large institutional investors have for decades relied on fee-free co-investment access as a standard market practice, particularly with flagship transactions where GPs secure access to high-quality deal flow. Any systematic shift toward charging co-investment fees would compress returns and alter the competitive dynamics between asset owners and private equity sponsors. Graham's explicit statement—that CPP Investments would fundamentally reassess its PE strategy under such conditions—represents a clear negotiating position and reflects broader institutional investor concerns about fee inflation in private equity markets.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.