Canada's Top Pension Eyes Bigger Hedge Fund Bet

What CPPIB is planning

Canada's largest pension is preparing to roughly double what it allocates to hedge funds, targeting around $160 billion over time, per people who asked not to be named because they were discussing internal deliberations. The push includes seeking stakes with heavyweight managers it does not back yet, with Izzy Englander's Millennium Management specifically on the list.

A CPPIB representative declined to comment. Already one of the world's biggest sources of hedge fund capital, a larger allocation would make the fund an even more consequential partner for managers globally.

Why now

CPPIB says it expects its total assets to about double in the next seven years, and hedge funds helped the pension beat its own yardsticks in the latest fiscal year. The annual report indicates that external hedge fund stakes accounted for much of the $3.4 billion in net income generated by the Capital Markets and Factor Investing segment during the 12 months that ended in March.

Strategy wise, the performance boost came from areas including quantitative equities, global macro, multi-strategy approaches, fundamental stock-picking, and fixed income. On a podcast this month, Heather Tobin, who leads the hedge fund investing unit, said having the ability to tap both large multistrategy platforms and specialist managers is crucial, and added that "very favorable" conditions for skilled managers arise when markets are volatile and interest rates are higher.

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The broader backdrop

The expansion stands out as some pensions, endowments and foundations have pulled back on new hedge fund commitments, with slower private equity payouts leaving them with less cash to recycle. Meanwhile, Abu Dhabi Investment Authority, with more than $1 trillion, has also been stepping up hedge fund investments.

It is happening after a rough stretch for the industry, with choppy markets dealing losses even to well regarded firms. Some funds have responded by trimming staff and handing back capital, and October delivered record monthly drawdowns for a number of managers.

Who CPPIB is already with

CPPIB invests with more than 60 managers, including Two Sigma Investments, Bridgewater Associates, ExodusPoint Capital Management, Rokos Capital Management and Magnetar Capital, according to its website. The roster also includes managers that have faced recent turbulence, such as Rob Pohly's Samlyn Capital and Hamza Lemssouguer's Arini Capital Management.

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