Key Takeaways
- • OMERS is executing a capital rotation strategy in private markets, shifting from direct European investments toward fund-based allocations and expanding deal activity as market conditions strengthen in mid-2026.
- • Global private equity deal activity surged in 2025 to $1.2 trillion across over 9,000 transactions—only the second time in history the sector has crossed the trillion-dollar threshold, with megadeals ($1B+) reaching a record $568 billion.
- • OMERS has rebalanced its portfolio allocation, with private equity representing 18% of assets as of December 31, 2025, while infrastructure comprises 22% and public equities 20%, reflecting a strategic pivot toward private markets over the past seven years.
- • The market environment for 2026 is expected to remain favorable, with the Federal Reserve's rate cuts lowering the cost of capital, dry powder at near-record levels, and sponsors demonstrating renewed appetite for large transformative transactions across all sectors.
- • OMERS's strategy shift includes halting certain direct investment activities while reintroducing fund-based partnership models, aligning with broader market trends toward more selective deployment and focus on execution and liquidity in a volatile environment.
Summary
OMERS, the $53 billion Canadian pension fund, is advancing a capital rotation strategy designed to optimize deployment across private markets as deal activity strengthens in the first half of 2026. The organization has shifted its approach by halting direct investments in certain geographies, notably Europe, while simultaneously reintroducing fund-based investment structures. This strategic recalibration reflects a broader transition the fund has undertaken over the past seven years, marked by a dramatic shift in target asset allocation toward private markets and away from traditional public equities.
The broader private equity landscape supports OMERS's capital deployment plans. In 2025, U.S. private equity rebounded sharply following a tariff-induced slowdown in the second quarter, ultimately generating over 9,000 transactions valued at $1.2 trillion—marking only the second time on record that annual PE deal value has exceeded the trillion-dollar threshold, rivaling the historic 2021 peak. Notably, megadeals valued at $1 billion or greater reached a record $568 billion in aggregate value across 150 transactions, demonstrating substantial sponsor conviction for large-scale, transformative acquisitions.
OMERS's current asset allocation reflects its commitment to private markets diversification. As of December 31, 2025, private equity represented 18% of the fund's total assets, trailing infrastructure at 22% but outpacing public equities at 20%. This positioning places OMERS in line with broader institutional trends favoring alternative assets and long-term partnership-based capital deployment. The fund's 2025 investment returns totaled 6%, with the plan's smoothed funded status improving to 99% from 98% in 2024, and ten-year average annual returns of 7.1% net of expenses.
Looking forward to 2026, market conditions are expected to remain supportive of capital deployment. The Federal Reserve's year-end rate cuts have lowered the cost of capital, while dry powder levels remain near record highs, positioning sponsors to move beyond preliminary discussions and execute across all sectors. According to PwC's mid-year outlook, private capital M&A is turning more selective in volatile markets, with sponsors prioritizing execution, liquidity, and AI-enabled value creation—priorities that align with OMERS's recalibrated fund-based approach and minority transaction strategy alongside control deals.
The broader private equity landscape supports OMERS's capital deployment plans. In 2025, U.S. private equity rebounded sharply following a tariff-induced slowdown in the second quarter, ultimately generating over 9,000 transactions valued at $1.2 trillion—marking only the second time on record that annual PE deal value has exceeded the trillion-dollar threshold, rivaling the historic 2021 peak. Notably, megadeals valued at $1 billion or greater reached a record $568 billion in aggregate value across 150 transactions, demonstrating substantial sponsor conviction for large-scale, transformative acquisitions.
OMERS's current asset allocation reflects its commitment to private markets diversification. As of December 31, 2025, private equity represented 18% of the fund's total assets, trailing infrastructure at 22% but outpacing public equities at 20%. This positioning places OMERS in line with broader institutional trends favoring alternative assets and long-term partnership-based capital deployment. The fund's 2025 investment returns totaled 6%, with the plan's smoothed funded status improving to 99% from 98% in 2024, and ten-year average annual returns of 7.1% net of expenses.
Looking forward to 2026, market conditions are expected to remain supportive of capital deployment. The Federal Reserve's year-end rate cuts have lowered the cost of capital, while dry powder levels remain near record highs, positioning sponsors to move beyond preliminary discussions and execute across all sectors. According to PwC's mid-year outlook, private capital M&A is turning more selective in volatile markets, with sponsors prioritizing execution, liquidity, and AI-enabled value creation—priorities that align with OMERS's recalibrated fund-based approach and minority transaction strategy alongside control deals.
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