Strong private equity performance drives investors into sector

Feb 28, 2013, 08:00 ET from Kensington Capital Partners Limited

Kensington Global Private Equity Fund Announces Record Distribution

TORONTO, Feb. 28, 2013 /CNW/ - Three years into a North American economic recovery of slow but steady GDP growth, most investors have not seen this improved economic performance translate into portfolio earnings. Yet despite the headwinds facing public markets, private equity continues to represent an alternative investment strategy that is delivering sustained investor returns.

The realities of today's public markets, such as continued volatility driven by external events — from fiscal crises in Europe to political gridlock in Washington — combined with normal gyrations from quarterly earnings expectations and high frequency trading, have gradually separated the stock market index from the economic cycle. And as public markets finally edge back to pre-downturn levels, public market investors must face the discouraging fact that recent stock market gains — while encouraging — have merely returned market values to where they were five years ago.

"Over the past several years, traditional portfolios of stocks and bonds have largely failed in their core mission to create wealth, generate income, and secure long-term retirement savings, while the private equity market has been providing investors with a reliable avenue to participate in the steady economic growth that surrounds us," says Rick Nathan, Managing Director, Kensington Capital. "Private equity represents an investment in the real economy, where wealth creation is based on real measures such as earnings growth and profitability, and the abilities of private equity managers to translate these measures into tangible gains for investors."

This wealth creation has translated into strong performance for the Kensington Global Private Equity Fund, which today announced a record distribution of $2.13 per Unit, representing a 9.8% payout. After this latest distribution, fund investors will have received a total of $3.69 per Unit (16.9%) within the past 12 months.

Canada's largest institutional investors, which require steady long-term portfolio gains to fund their pension obligations, have also participated in the growth of private equity markets and are continuing to allocate more and more capital to the sector. In particular, the Canada Pension Plan Investment Board (CPPIB), Canada's, largest investor, held 17.1% of its total assets in private equity investments as of December 31, 2012, while OMERS increased its private market investments (consisting of private equity, real estate and infrastructure) to 40% during the 2012 period. Globally, according to Preqin's Investor Outlook, a strong majority (85%) of large international investors stated that their private equity portfolio returns met or exceeded expectations in 2012, and almost a third (27%) expect to increase their level of exposure to private equity in 2013.

Investment in private markets remains promising, with private equity activity continuing an upward trajectory. Canada's Venture Capital & Private Equity Association (CVCA) and Thomson Reuters last week released a joint report showing that the 2012 private equity market saw the highest deal volume on record. According to the report, disclosed Canadian buyout and private equity disbursements totalled $11.6 billion in 2012, marking the highest level of dollars invested in the Canadian market since 2008. Private equity transactions totalled 313, up 4% from 2011 and establishing a new market record.

Kensington Global Private Equity Fund Distribution Details

The distribution announced today will be paid on March 26, 2013 to Unitholders of record on March 5, 2013. Each Unitholder will be paid a distribution of $2.13 per Unit, for a total distribution of approximately $5.9 million. Each class of Units will receive the same distribution per Unit.

The Kensington Fund invests in a diversified portfolio of private companies and funds, typically holding each underlying company for a period of three to five years before selling to a larger corporation or into the public markets through an IPO.

"When we sell an investment at a profit, our policy is to distribute those profits to our investors, while re-investing the original capital," reports Nathan. "Today's announcement represents the distribution of the realized profits that we have generated from the sale of portfolio companies through the past several months."

The new distribution exceeds the $1.56 per Unit paid in October 2012, reflecting strong growth in the realized gains achieved within the Kensington private equity portfolio.

Current Unitholders of the Fund who wish to reinvest the distribution into additional Units should ensure that they are enrolled in the Fund's Distribution Re-Investment Plan (DRIP) prior to March 22, 2013. Individual Unitholders should contact their Investment Advisors to enroll in the DRIP via the FundSERV system.

Broadening Access to Private Equity

Traditionally, private equity has only been available to large institutional investors who can meet very high minimum amounts in several different investments to create a diversified portfolio. The Kensington Fund was established to make these investment opportunities available to the broader investing public. Institutional investors invest alongside individual investors in the Kensington Fund, which can be purchased by accredited investors through their investment advisors via the FundSERV system.

Other barriers to entry for many investors include the challenges of identifying and evaluating private equity firms, difficulty accessing high quality opportunities, and the risk of committing to new private equity funds as a 'blind pool', before any of the private company investments have been made.

"At Kensington we seek to remove barriers and make private equity markets more accessible to investors.  Anyone can look at our current investment portfolio via our website and our regular investment reports and decide whether or not they want to buy into it today, at the current net asset value (NAV)," notes Nathan, "Investors like the idea of buying into a fully assembled portfolio that includes a mix of new companies with a 5-year time horizon, as well as companies being prepared for sale, and everything in between. They don't have to wait several years for their first distribution, like they would if they were buying into a brand new private equity fund."

The Kensington Global Private Equity Fund has a strong track record of creating value for investors, and has generated annualized returns of 11.0% in the three years ending on December 31, 2012 — more than double the S&P/TSX Index's annualized returns of 4.5% over the same period.

About Kensington:
Kensington, founded in 1996, is a leading Canadian investor in alternative investments. Kensington is best known for its private equity investment programs, having committed over $600 million since 2002, and is also an active investor in infrastructure assets and hedge funds. Institutional investors such as pension funds and professional asset managers, as well as high net-worth individuals and retail investors, hold Kensington funds. For more information on Kensington and current offerings, please visit

SOURCE Kensington Capital Partners Limited