Letter from our Chairman: Kensington — Past, Present and Future
The Private Equity industry has changed a lot over the last 25 years. I hope this brings more understanding to where we have come from, and where we are heading. — Tom Kennedy, Chairman
The Early Days
The story of Kensington Capital Partners is not about me, nor is it about any individual. It’s about the journey of learning about the importance of people and how relationships continue to play such a vital role in our business today. Most of our investments come from people that have known us for many years and want to introduce an opportunity to us because of the trust and respect that thrives in the relationship we have developed by working together.
In late 1995, Bernard Lemaire, then CEO of Cascades Inc. phoned to ask if I would act as financial advisor for Cascades in the sale of a division that they deemed non-strategic. Although we wanted to introduce Bernard to the M&A team at TD, where we were finishing up a one-year transition contract, Bernard was very persistent to work with what would become Kensington. Eventually, when formed in January 1996, Kensington took on the project and successfully sold the division for Cascades. We split the fee with TD because that felt like the right thing to do. Today, our relationship with TD continues to be very strong. Doing the right thing matters.
In the late 1990s, there was a period where transportation industries were going through a significant upheaval with a high level of M&A activity coming out of a recession. The Ministries of Transportation and Finance asked Kensington to advise on matters related to rail, air and ocean transport. The advisory role continued for several years as those industries transformed themselves to compete in the 21st century. There were tax incentives designed to encourage investments in rolling stock, and there was a lot of consolidation activity in the airline industry. Kensington prepared complex financial models of the entire Canadian airline business through the eyes of travellers, shareholders, and different levels of government. We also analyzed the impact of various proposed business combinations on governments. The advisory mandate was very well received in Ottawa.
Launching Our First Private Equity Fund
All along, we had been investing our own capital in companies that we thought had good growth potential. We provided the initial capital for two highly successful investment funds; we invested in both private and public market opportunities and developed a track record of very strong returns. In 2002, Kensington raised its first private equity fund of $100 million and within 3 years had doubled our assets under management.
In 2005, we strengthened our team with a focus on venture capital investing, and in 2007, we successfully launched the Kensington Private Equity Fund.
Post 2008
After the financial crisis of 2008, we went to work deploying capital. During this time, some interesting opportunities derived from our network of general partners to acquire secondary positions in their funds.
Around this time, we were also investing in IT as the smartphone revolutionized the world. The launch of the iPhone in 2007 transformed the IT industry. Consider what we thought was a wonderful Motorola flip phone compared to an iPhone 12 and other devices whose functionality continues to evolve.
As private equity grew in popularity, commitments to funds grew and co-investment opportunities for LPs of those funds declined. Kensington began to look for direct investments that did not depend on our fund portfolio for opportunities. This change in market dynamics led to our current hybrid portfolio that provides significant diversification, and continues to build on our extended network of GPs and company managers that feed opportunities to our funds. In 2015, initiation of the Venture Capital Action Plan (VCAP) program by the Federal government, followed by a second chapter called Venture Capital Catalyst Initiative (VCCI) in 2018 added significant funding to our venture program, as did the award of the BC Tech Fund mandate in 2016.
25 Years Strong
It is hard to believe it has been 25 years since the start of Kensington Capital Partners. Never could I have imagined in 1996, what we would achieve and how much we would grow on so many levels. With so many changes in business over the last 25 years, one thing remains true: the importance of investing in the right people. We look forward to shaping this exceptional company that continues to build great teams, businesses, and communities.
Visit us at www.kcpl.ca for more information. Follow us on Twitter @kensingtonfunds.
