An arm of the Canada Pension Plan Investment Board said on Thursday that it would be the latest partner in a merchant banking business run by Kohlberg Kravis Roberts.
The addition of the Canadian pension fund is the first expansion of the operation, known as MerchCap Solutions and founded last summer by K.K.R. and Stone Point Capital. The business is aimed at providing capital markets advice and direct investments for middle-market companies and those owned by other private equity firms.
Under the terms of the partnership announced on Thursday, the Canadian pension fund will invest $50 million into MerchCap. It also plans to invest up t $2 billion in debt investments arranged by the business, including those to mid-market companies.
The Canada Pension Plan Investment Board’s head of private debt, Mark Jenkins, will also join MerchCap’s board and its strategic development and capital allocation committees.
“This investment is an excellent opportunity to expand C.P.P.I.B.’s private debt portfolio into the middle market, an attractive and underserved market segment,†Mr. Jenkins said in a statement.
Mr. Jenkins’s organization is one of several Canadian pension funds that have moved from being passive limited partners in private equity firms to investing directly in opportunities. The Canada Pension Plan has participated in the likes of the $1.6 billion takeover of 99 Cents Only Stores, in which it partnered with Ares Management.
