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2 Canadian pension funds finding value in data distribution

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Two Canadian public pension plans are finding new investment opportunities in data distribution and storage.

OMERS Private Markets, the private equity unit of the C$85.2 billion ($62.4 billion) Ontario Municipal Employees' Retirement System, Toronto, last month joined with company management of Inmar Inc. to buy the Winston-Salem, N.C.-based operator of transaction networks for retailers and manufacturers worldwide. Inmar was bought from private equity firm ABRY Partners, which retained a minority stake in Inmar.

Terms of the deal were not disclosed, but Eric Haley, New York-based managing director at OMERS Private Markets, said OMERS is the majority shareholder in Inmar.

In late March, a consortium including PSP Investments, which manages the assets of the C$112 billion Public Sector Pension Investment Board, Ottawa, acquired Santa Clara, Calif.-based Vantage Data Centers, which provides data delivery and storage services. The consortium, which also included global communications infrastructure investor and operator Digital Bridge Holdings LLC and TIAA Investments, bought Vantage from Silver Lake Partners, according to a news release from PSP. Terms of the deal were not disclosed.

Inmar, whose systems transmit information on redeeming coupons, filling prescriptions and returning purchased products to retailers, was an attractive investment for OMERS Private Markets, said Mr. Haley, as is the entire sector of data distribution.

“In the sector itself, there are high barriers to entry, recurring revenue, predictable income and overall industry growth,” Mr. Haley said. “It's very attractive for capital generation. We're looking to make high-quality investments with downside protection, and we think data distribution provides that.

“We see all sorts of different transactions in the couponing and promotion space. It's very attractive to retailers and (consumer packaged goods) companies. It's extremely valuable to their customers.”

Although the data distribution market is relatively new, Mr. Haley said Inmar is the third investment in the sector by OMERS Private Markets. The two previous deals concerned legal process outsourcing firms, which distribute and store court data and documents electronically; OMERS Private Markets acquired DTIglobal.com in August 2014, and last July it announced the acquisition of Epiq Systems Inc., which was merged with DTIglobal.com, Mr. Haley said.

Although the data distribution market is relatively new, Mr. Haley said Inmar is the third such investment by OMERS Private Markets. In August 2014, it acquired DTI Global, a legal process outsourcing company, and in July it announced the acquisition of a similar legal process outsourcer, Epiq Systems Inc., which was merged with DTI, Mr. Haley said.

“It's sort of a new market; not one with 30-odd firms,” Mr. Haley said. “There's a lot of competition in this space. But we're excited about it.”

With PSP's deal for Vantage, Daniel Garant, executive vice president and chief investment officer at PSP Investments, said in the news release announcing the March 27 deal that it was attractive because of Vantage's leading position “in a sector which we believe will grow significantly in the coming years.” Officials at PSP Investments could not be reached for further comment.

OMERS had 13.6% of assets in private equity as of Dec. 31; the portfolio returned a net 12.6% in 2016. PSP had 10.7% of assets in private equity as of March 31, 2016, the latest data available. The portfolio returned 2.4% for the 12 months ended March 31, 2016, according to PSP's 2016 annual report.