B.C. pension manager sells stake in U.K. credit group Hayfin Capital

Already flush with cash, British Columbia Investment Management Corp. (BCI) is adding another billion dollars to its war chest.

The Victoria-based pension fund manager agreed Tuesday to sell its majority stake in European alternative asset manager Hayfin Capital Management. Dallas-based sports investor Arctos Partners will finance a management buyout that will see Hayfin’s leadership team become its new majority owners.

While the financial terms were not disclosed, a source familiar with the matter said the deal valued Hayfin at €1.2-billion, with BCI selling a 60-per-cent ownership stake. The Globe and Mail is not identifying the source because they were not authorized to speak publicly about the deal.

That would translate to €720-million in proceeds for BCI, which at current exchange rates is roughly $1.1-billion. Since BCI first acquired a majority stake in Hayfin in 2017, the source said, the value of the pension fund’s investment has more than tripled, as Hayfin’s total assets under management have grown from €8-billion to more than €31-billion.

The transaction represents the second billion-dollar windfall for BCI in recent months. In April, the fund manager sold more than US$1-billion of its stakes in private equity funds to French buyout firm Ardian SAS.

Last month, BCI reported a 7.5-per-cent return in its most recent fiscal year, as its total assets under management grew to $250-billion from $233-billion a year earlier. At the time, it said it was on the hunt for acquisitions, as higher interest rates had created a buyer’s market.

“We can be very, very aggressive in deploying in markets,” Ramy Rayes, BCI’s executive vice-president of investment strategy and risk, told The Globe at the time. “People might be forced sellers. That definitely won’t be our case, given our liquidity numbers, and we’re hoping to scoop some things on sale if they ever occur.”

BCI has been moving further into private investments in recent years. In addition to Hayfin, it has made direct investments in several other private companies, including insurance providers BMS Group and Compre Group, beverage companies Refresco and Waterlogic and investment adviser ZEDRA.

Private investments have proven to be an increasingly common strategy among pension funds and other larger institutional investors seeking to avoid the persistent volatility of public markets.

In its last fiscal year alone, BCI committed more than $15-billion to private market investments. The historic pace of interest-rate increases over the past two years, combined with the U.S. regional banking crisis, has been a major boon for private lenders. Investing in Hayfin allowed BCI to profit directly from that trend.

BCI also said Tuesday it will continue to invest in some Hayfin funds. Hayfin, which was founded in 2009 by former Goldman Sachs executives, raised more than €6-billion for its latest flagship European private credit fund.

Arctos is best known for having ownership stakes in the Boston Red Sox and the Paris Saint-Germain soccer team. It launched a new strategy called Keystone last year specifically to invest in asset managers, which led to the Hayfin deal.