Jim Leech, senior vice-president of Teachers’ Private Capital – the private investment branch of the Ontario Teachers’ Pension Plan(Teachers’)– addressed the Economic Club of Toronto today about the “new” private capital that characterizes this portfolio. What’s new about private capital, he said, is time and cost.

Back in 1991, when Teachers’ created its private investment program, “a new class of private capital investor had been born, one that could invest without a defined timeline,” said Leech. Teachers’ timeline is more than 70 years. “Because of that 70-year timeline – from the start of a teacher’s career to the end of their survivor payments – our private capital has the luxury of being able to hold its investments for the long term,” he said. Teachers’, therefore, doesn’t have to divest and pay out returns to partners. “Our partners are our members,” said Leech, “and they share our patience.”

In terms of cost, it’s miniscule. Leech said Teachers’ costs are about a tenth of a typical two-and-20 private equity or hedge fund.

Although private capital has been getting a bad rap in the media, particularly in Europe, Leech said there are advantages. According to a study by consulting firm AT Kearney, private capital can increase job growth and value in a company. The study indicated that private equity investors created more than one million jobs in Europe over the last four years. That is a 5.4% growth rate, compared to a 2.9% for traditional companies.

A company’s increase in value, meanwhile, can be achieved through three strategies, according to the study: improving performance, regrouping and refocusing, and buying and building.

“In other words,” said Leech, “in private capital, it’s all about focusing on strategy – and ignoring all of the peripheral noise that distracts an executive team from what is truly needed to drive the corporation.”

To comment on this story email brooke.smith@rci.rogers.com.

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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