Pension fund says buyer beware as retail rush reshapes private markets

Canada's largest pension fund is pressing private equity and private credit managers to accept its terms or lose its partnership. According to Bloomberg, the Canada Pension Plan Investment Board (CPPIB) is unlikely to keep partnering with private equity managers that begin charging institutional investors fees on co-investments that have long been offered on a no-fee, no-carry basis. Chief executive John Graham said the policy "will undoubtedly have an impact on our appetite for the asset class, because that's the model we run," as reported by the Financial Times and Bloomberg.

The warning comes as private capital firms push aggressively into the so-called wealth channel, raising billions from retail investors while institutional investors grow more selective after weaker private equity performance and concern about receiving smaller allocations. Graham said that if retail money changes norms around offering large backers direct deals at lower fees, it would affect CPPIB's appetite for the asset class. CPPIB holds about 29 percent of its assets in private equity and 11 percent in public and private credit, and reported net assets of about $777.5bn at the end of September. Despite recent low distributions from private equity funds, Graham said the fund has invested in private equity for 20 years and remains a believer in the governance model of private ownership, describing the partnership between institutional investors and general partners as "a very profitable model for everybody."

On private credit, Graham was more cautious. He told the Financial Times that the market is "a buyer beware market" and that non-investment-grade investors "should be sophisticated and... know what you're buying." CPPIB mainly invests directly in private credit rather than through funds. While he views the asset class as distributing risk broadly, he expressed concern about "the speed at which deals are getting done," adding that "we have to make sure that we aren't compromising on due diligence."

Capital continues to flow into the asset class. PitchBook data cited by the Financial Times show private debt funds raised US$154bn in the first nine months of 2025, on track to fall below the US$230bn recorded for 2024, though still well above levels of a decade ago. Blackstone president Jon Gray said in October that the era of excess private credit returns had ended as central banks cut rates, and recent failures at First Brands and Tricolor have highlighted broader credit risks. Graham also warned about more retail capital flowing into riskier strategies such as junk leveraged credit, which he described as "buyer beware markets," contrasting them with public equity markets, which he called "a gentleman's game," according to Bloomberg. He emphasized that "institutional investors are still the bedrock investors."

CPPIB has also deliberately underweighted the "Magnificent Seven" megacap technology stocks, which means it currently underperforms the S&P 500. Graham framed this as risk control, saying "diversification is an act of humility" and that "the concentration level in the US equity markets is not a risk we want to take."