Several of Canada’s largest pension funds are scaling back direct private equity investments and deepening partnerships with global buyout firms, as operational complexity and a challenging exit environment reshape institutional strategy.

Caisse de dépôt et placement du Québec (CDPQ), Omers, and Ontario Teachers’ Pension Plan are among the institutions shifting toward a co-investment model that allows them to access high-quality deals alongside fund managers, while avoiding the higher costs and risks of owning companies outright.

CDPQ is two years into a five-year plan to reduce its direct private equity exposure from 75% to 65%, with Martin Longchamps, head of private equity and credit, noting the shift enables stronger deal flow through manager relationships. Omers announced in September that it would stop pursuing direct investments in Europe, opting instead to back external private equity funds where complementary.

Ontario Teachers’, while continuing direct investments, is increasingly targeting selective partnerships as part of a more flexible allocation strategy.

The move comes amid broader industry trends: rising competition for deals and talent, compressed exit timelines, and a growing need for hands-on management have made direct ownership less appealing for even the most sophisticated institutional investors.

Canadian pensions remain among the world’s most significant backers of private equity, with 22% of public fund assets allocated to the asset class, according to think-tank New Financial. Nearly half of that exposure is now through co-investments and partnerships, according to CEM Benchmarking.

The Canada Pension Plan Investment Board (CPPIB), the country’s largest pension investor with $504bn in assets, confirmed its longstanding preference for strategic partnerships.

As private equity continues to evolve, pension allocators are sharpening their focus on models that balance access, alignment, and operational leverage, reinforcing the sector’s position as a core long-term investment strategy.

Source: Financial Times