The Caisse, OMERS, Teachers, and some of the other major Canadian pension funds missed their internal benchmarks last year.
Performance in their real estate portfolios was the major culprit as high interest rates have pummeled the sector, particularly on the commercial side.
Will a real estate slide lead these funds to increase their venture allocation?
John Ruffolo, who founded pension-backed OMERS Ventures in 2011 and now heads his own private equity firm, said the pensions will adjust their portfolios accordingly. But he’s concerned it won’t end their reliance on fixed income.
Before the pandemic, low interest rates made assets like bonds less attractive while increasing the risk appetite for investments in startups. Now that fixed income is attractive, investors are more reluctant to take on higher-risk assets. That means venture performance “is going to be more important now than it has been in the last 10 years,” Ruffolo said.
From the last BetaKit Newsletter edition, you’ll recall venture deal volume fell 14 percent in 2023 and companies this year are having a more difficult time raising capital. And if they do raise, they’re likely raising down rounds.
“The pension funds should be saying, ‘Okay, I get it. Yes, fixed income is more attractive, but the values are so much lower now in venture,’” Ruffolo added. “This is when the pension funds should be deploying.”
Senior business leaders in Canada recently put their names behind an open letter calling for pensions to invest more in domestic businesses. It’s a controversial proposal that has steep opposition.
But Ruffolo’s not in favour of mandating pension allocations. After all, he said, part of the world-renowned success of Canada’s pension funds is the singular focus of their mandates: to get maximum returns on their retirees’ money.
Thanks for reading on and ’til next week,
Bianca Bharti
Newsletter Editor
TOP STORIES OF THE WEEK
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CDPQ’S $250-million Equity 25³ Fund is done after only four investments
Josh Scott has the exclusive on Caisse de dépôt et placement du Québec quietly shuttering its fund meant to increase diversity and inclusion in growing small- and medium-sized companies.
When it launched in October 2020, the Caisse claimed Equity 25³ was “the largest Canadian fund ever created to target companies leveraging diversity as a vector of development and expansion.”
Today, Equity 25³’s webpage is no longer active and instead redirects to a page that outlines CDPQ’s broader investments in Québec.
One year later, what filled the hole SVB left in Canadian tech lending?
One year after the collapse of SVB—which saw a bank run inspired by concerns about the bank’s liquidity lead to a swift shutdown by regulators and eventual sale to First Citizens Bank in the U.S.—venture capitalists and lenders BetaKit spoke with said the ecosystem is missing one of a small number of doors to knock on for debt funding.
But the bank’s four-year run in Canada changed the tech lending landscape significantly, with its presence prodding the Big Five banks to start competing for startups’ business and giving smaller companies better access to bank pricing for debt.
SEC orders Delphia to pay $225,000 USD for “false and misleading” statements about use of AI
The United States Securities and Exchange Commission has ordered the US division of Toronto-based FinTech startup Delphia to pay a $225,000 USD penalty for statements it made about its use of artificial intelligence.
According to a March 18 statement from the SEC, the regulator alleged that Delphia made “false and misleading” statements in its SEC filings, in a press release, and on its website regarding its use of AI and machine learning that incorporated client data into its investment process.
WonderFi to acquire Australian crypto trading licence as foundation for international expansion
In an exclusive interview with BetaKit, WonderFi CEO Dean Skurka said that international expansion—which the Toronto Stock Exchange-listed firm deprioritized during the crypto downturn—has become an important part of WonderFi’s growth strategy again now that market conditions have improved.
“Having come through a transformative year with significant tailwinds behind us, a strong balance sheet, and a healthy crypto market, we felt like it was the right time to continue to build out on our successes locally,” said Skurka.
Top Hat’s Maggie Leen appointed CEO two months after Joe Rohrlich’s quiet departure
Toronto-based online education firm Top Hat has tapped its former CMO, Maggie Leen, to lead the company as CEO.
The appointment comes roughly two months after BetaKit was first to report that Top Hat’s CEO Joe Rohrlich and CRO Matt Schurk had quietly departed the EdTech company. At the time, Top Hat said that Leen would be taking on an expanded role within the business. In a statement announcing her appointment, Top Hat said Leen was “instrumental in shaping the company’s corporate and go-to-market strategy” during her tenure as CMO.
Funding, Acquisitions, and Layoffs
VAN – PacifiCan announces $14M in new investments
CAM – Poseidon Ocean Systems – $28M CAD
SUD – Flosonics Medical – $27M CAD
HAM – Fusion Pharmaceuticals acquired by AstraZeneca for $2.4 billion USD
HAM – NGen launches $100M sustainable manufacturing challenge
TOR – WonderFi to acquire FX Institutions Pty. Ltd.
TOR – Google Canada funds $2.7M in AI research grants
TOR – Borderless AI – $27M
TOR – PocketHealth – $45M CAD
MTL – Rithmik Solutions – $2M CAD
MTL – Landerz – $1.5M CAD
MTL – Busbud acquired Buson
The BetaKit Podcast
Cory Doctorow’s new tech crime thriller takes us back to the days of Yahoo!
Canadian journalist and author Cory Doctorow joins to discuss his new tech crime thriller The Bezzle, and how remembering the early Web 2.0 era can show us both where we are and where we’re going.
“The thing that makes noir fiction noir is the detective is presented as an unlicensed cop who goes to the places the cops can’t go and asks the questions the cops can’t ask to solve the crimes the cops can’t solve. But by the end, he is reminded very forcefully that these were in fact places the cops didn’t want to go.”
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