CVCA-UPDATE 2-OMERS aims to build private equity portfolio

Wed May 25, 2011 11:10am EDT

* OMERS Private Equity plans to be net private equity buyer

* OMERS announced plans to buy Husky Mouldings this month

* Canadian pension fund may open another global office (Adds details)

By Pav Jordan

VANCOUVER, May 25 (Reuters) - OMERS, one of Canada's largest pension fund administrators, aims to bolster its private equity portfolio as it builds on a strategy of buying companies and working with existing management to enhance value, a senior OMERS executives said.

OMERS, or Ontario Municipal Employees Retirement System, will look for deals in the C$100 million ($102 million) to C$500 million range, the size at which it usually targets acquisitions, Jim Orlando, managing director for private equity, told Reuters in an interview.

"Net-net, we will be buyers, and net-net, we intend to increase the number of portfolio companies we have under management," Orlando said ahead of the annual Canadian Venture Capital and Private Equity Association conference in Vancouver.

Teaming with private equity firm Berkshire Partners LLC, OMERS earlier this month said it would buy Husky International from Canadian buyout shop Onex Corp (OCX.TO) for $2.1 billion. It was the latest in a recent flurry of secondary buyouts -- where one private equity firm sells to rival buyout firm.

OMERS, which invests on behalf of more than 400,000 active and retired municipal employees in the Canadian province of Ontario, has more than C$53 billion in net assets. Its private equity allocation is about C$5.5 billion, and it currently has about a dozen companies in its portfolio.

The private equity arm invests directly, taking control of companies and working with existing management to make them more valuable before selling them at a profit down the line.

Over the past decade the pension fund wound down a strategy of investing through funds and shifted toward direct investments, said Orlando.

Orlando is one of more than 600 representatives of private equity and venture capital funds and similar investors in Vancouver this week for the annual CVCA event.

This year, there are clear signs that deal-making is heading back to pre-recession levels. High levels of liquidity are driving exits, or the process by which a private equity players sells an investment. Prospective buyers are benefiting from easier access to debt and cash savings realized during the financial crisis.

"This is actually a very good time from the corporate purchase standpoint because companies have good visibility of coming years," Orlando said.

"Generally corporate balance sheets are quite strong ... so that makes for viable corporate transactions in this environment, and in these incoming couple of years."

Private equity falls under the alternative assets category for OMERS, which has offices in Toronto, in New York and in London.

Inside Canada, OMERS invests broadly across asset classes, whereas in larger markets such as the United States and Europe, it tends to focus on areas like business and financial services and industrial manufacturing in consumer oriented products.

Its practice of direct investing and working with existing management means it has to be close to its assets.

At a time when global investors are looking increasingly to emerging markets for growth, Orlando said the OMERS was considering opening new global offices, but he preferred not to cite specific examples or time frames.

($1=$0.98 Canadian) (Reporting by Pav Jordan; Editing by Frank McGurty)

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