HOOPP’s private equity investment activities are directed by HOOPP Capital Partners, a successful team that provides absolute returns that complement HOOPP’s other investment activities. The team is now entering its tenth year.

Activity in the large leveraged buy-out market slowed significantly in 2007 as the credit environment reduced support for such transactions. In fact, some proposed high-profile transactions involving public companies were abandoned altogether. 

By contrast, smaller and lower-profile segments of the private equity industry remain well positioned for continued activity. Going forward, it is expected that the private equity industry focus will be on business-driven rather than finance-driven investment. These conditions play towards HOOPP Capital Partners’ traditional entrepreneurial strengths.

When making investment choices, HOOPP Capital Partners typically focuses on situational, company and management-specific factors – rather than sector themes and ever-changing public market conditions. Nonetheless, HOOPP Capital Partners is keenly aware of the overarching impact of capital markets, currencies and economic conditions. 

During 2007, the portfolio’s investment performance was broad-based, generating a return of 22.7 per cent (before currency adjustments). This return is exceptional given that a significant portion of the portfolio’s $1.22 billion in assets is newly invested. Even after currency adjustments, the return was a respectable 17.49 per cent – resulting in investment profits of $181 million. (The overall impact of this currency adjustment was muted outside of this portfolio by active overlay strategies at the HOOPP level that saw 50 per cent of the portfolio’s currency exposure hedged back into Canadian dollars.) 

Returns were essentially cash-based. This is because the portfolio’s carrying value remains slightly below cost, reflecting an appropriately modest assessment of investment carrying values.

The carrying value of the portfolio at December 31, 2007 was $1.22 billion. At 4.1 per cent of the total Fund, the private equity portfolio finished the year slightly overweight against the 3.5 per cent neutral policy allocation.