CPPIB's credit head wants to take advantage of leveraged buyout boom

financialpost.com:

Canada’s largest pension fund plans to nearly double the size of its credit holdings over the next five years, and it’s counting on an upturn in leveraged buyouts to generate some of that growth.

Andrew Edgell, global head of credit investments at Canada Pension Plan Investment Board (CPPIB), said the fund expects to have more than $115 billion in credit assets by 2029, compared with about $62 billion today. Much of that will be handled by its in-house investment team, which is prepared for a thaw in the buyout market after a couple of slow years.

“There’s pent-up demand. In discussions with sponsors, there’s a greater sense of optimism,” Edgell said in an interview. “There’s also so much dry powder that’s really pushing the LBO (leveraged buyouts) market to get unlocked.”

Global mergers and acquisitions rebounded in the first quarter of 2024 compared with a year earlier, driven by mega-deals in the finance, software and energy sectors. Still, there’s a long way to go before private equity firms return to the brisk dealmaking pace seen a couple of years ago, and uncertainty about interest rates remains a headwind.

CPPIB, the manager of Canada’s national pension fund, is expected to reach $1 trillion in assets around 2030, from almost $600 billion today. It has been investing in private markets for years, and its top executives see attractive returns in plunging even deeper into private lending — which already represents about two-thirds of its credit holdings.

Less than 20 per cent of the fund’s credit portfolio is being managed by third parties, according to Edgell, though the firm maintains strong relationships with some of the world’s largest alternative asset managers. It recently committed $350 million to Blackstone