Investment Process

Caledon believes rigorous evaluation criteria and detailed due diligence processes conducted by experienced investment professionals are required to identify and make successful private equity and infrastructure fund commitments, co-investments, secondary purchases and direct investments.

Proactive Sourcing and Screening of Opportunities

The first stage of Caledon’s investment process involves the proactive identification of desirable managers and potential investments through our industry relationships and personal networks, as well as referrals from other investors and other industry participants. This phase is followed by a review of available investment opportunities and application of Caledon’s industry knowledge and investment experience to create an assessment of the quality of these opportunities and the fit with our clients’ mandates and strategic objectives, and to identify risks/issues for follow-up during detailed due diligence. High potential opportunities consistent with clients’ strategies and appearing to possess the requisite elements will proceed to the next phase of the process.

Evaluation of Opportunities and Detailed Due Diligence

In developing and refining the investment thesis for a particular opportunity deemed of high potential based on a client’s objectives, Caledon conducts a thorough evaluation and detailed qualitative and quantitative analysis of the fund or direct investment opportunity. A critical assessment is made by Caledon regarding the prospective manager or company’s ability to continue to execute and deliver on its strategy and the investment’s likelihood of generating the expected return. In addition, through this process, Caledon further reviews and evaluates potential issues and risks to the investment rationale to ensure they are commensurate with the client’s short and long term investment objectives.

Specifically, for potential fund commitments, Caledon assesses the fund manager’s investment strategy and its competitive position, the historical performance and investment track record (including status of prior funds), the quality of the management team and organization, its investment and portfolio management processes, deal co-investors, and existing investors, among other factors.

Investment Decision, Documentation and Closing

Upon completion of due diligence, a formal report/investment recommendation, summarizing Caledon’s findings and final recommendations is developed and refined with our clients, for formal presentation to their CIO and/or their investment committees if necessary as part of their approval process.

Caledon is accustomed to the intricacies involved in reviewing and negotiating private markets agreements. Caledon takes an active role in reviewing business and legal issues of agreements, providing direction and working with external and/or internal legal counsel for detailed legal and tax review of an investment opportunity to ensure that the interests of our client(s) are taken into account. Caledon, where appropriate, negotiates commercial terms and business issues and provides input into the set-up and assessment of appropriate structures/investment vehicles to ensure compliance with our clients’ regulatory requirements.

The typical activities undertaken by Caledon include review and negotiation of limited partnership agreement terms and conditions and side letters on behalf of limited partners, assessment of the appropriate investment vehicle structure, and/or execution of direct investment or secondary purchase and sale agreements, including shareholder agreements.

Finally, Caledon will work with clients to assist in the commercial and financial closing of investment opportunities and to ensure complete legal file documentation is in place.

Monitoring / Administration

Utilizing the knowledge of Caledon’s investment team, guided by our experienced CFO, and through the use of a robust industry-recognized private markets investment management system, Caledon works together with clients to put in place a monitoring and reporting platform and a cash flow management system that suits their needs. Portfolio analytics include quarterly, annual and client-specific reports, covering investment cash flows, portfolio changes, performance metrics, and investment exposure by any client-defined attribute. In addition, Caledon works with our clients’ internal finance team to ensure proper flow of investment information, reconciliation of investment ledgers and accounts, and incorporation of information into their overall portfolio reporting.

Our proactive approach to investment monitoring includes recurring dialogue with investment managers and/or deal partners, participation in ongoing investor meetings and on-site visits.