Why one of the world's largest pension funds turned to venture

Transcript

I'm Mark Machin. I was formerly the president and CEO of the Canada Pension Plan Investment Board, or CPP Investments.

At CPPIB, CPB Investments, we actually didn't have venture capital in our portfolio until I became president and CEO. And, you know, a very rational decision not to invest in venture capital, which was made back in the mid-2000s when CPP was starting to become an active investor. And number one, the venture capital funds were very small, and we knew we were going to be a fund, as of today, over $500 billion. And so, investing in a venture capital fund and only being able to get a five, ten, and even $20 million allocation didn't really move the dial. So there's a lot of work for very little results in terms of allocations size. And then the second thing was back then, the risk-adjusted returns over the last ten, 20 years, venture capital to the mid-2000s, wasn't clear that they were better than just general private equity. So, you know, the additional risk you're taking wasn't clear you were being rewarded over a long period of time with better returns. Two or three things changed since then. One is the risk-adjusted returns since then over an extended period have proved out to be better so that you are being compensated. The second thing is the funds have gotten bigger, so there's just more availability even for big institutions to be able to invest in these funds. Third thing is that I felt that because we weren't invested in venture capital as an organization and as a fund, we were blind to innovation and disruptive forces that were affecting all of the rest of our hundreds of billions of dollars of investment. Not knowing what was actually going to happen on the disruption front was, you know, got more and more dangerous, basically.

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