Pension plans pumping $229M into fintech fund

TORONTO The Caisse de dépôt et placement du Québec and the Public Sector Pension Investment Board (PSP) are among a group of at least 14 investors pumping $229 million into an international fintech fund run by Portag3 Ventures, an early stage investor established by companies under the umbrella of the Desmarais family’s Power Corp.

The disclosed institutional and strategic investors committing the new funds also include insurance companies and financial institutions from Canada, France, Israel and the United States.

Among them are Aviva France, Harel Insurance & Finance, and Silicon Valley’s NSV Wolf Capital.

An earlier fundraising round in 2018 drummed up $198 million from other limited partners including National Bank of Canada, Intact Financial Corp. and Equitable Bank.

“To have a larger fund really allows us to compete in today’s market and ensures that we … have the capability and depth to follow on in those companies that prove to be top performers,” said Adam Felesky, chief executive of Portag3 Ventures.

Portag3’s first fund, which closed in 2016, was backed entirely by companies associated with Power Corp., including Power Financial, IGM Financial Inc. and Greatwest Lifeco, which remain anchor investors in the second fund.

“We’ve leveraged their trust and their assistance in helping us develop our platform to bring really credible investors, not only domestically but from around the world,” Felesky said.

In an interview, he said he sees the pensions that came on board in the latest round as potential direct investors alongside the fund in fintechs that become more established down the road.

Portag3 Fund II targets 10- to 20-per-cent ownership stakes in the companies it invests in, and more than $100 million has been invested so far in a number of companies, Felesky said.

The largest holding is Toronto-based Koho, which is positioning itself as an alternative to traditional banks with no-fee mobile spending and tracking.

Most recently, the Portag3 fund led a Series A investment round for Toronto-based Integrate.ai, a cloud-based machine-learning platform that allows businesses to interact with customers and gather “consumer intelligence.”

To have a larger fund really allows us to compete in today’s market ...

Felesky said he hopes some of the companies the fund invests in can replicate the success for Portag3 that online low-cost investment manager Wealthsimple has had for early backer Power Financial.

Wealthsimple had more than $3.4 billion in assets under administration as of Dec. 31, 2018.

The focus of Portag3 Fund II is global, but Felesky said Canadian investments are looked at with an eye to choosing those with potential to be “the winner in the market” for domestic fintech.

“It’s more likely a winner takes all,” he said, noting the relative size and development of the Canadian marketplace.

The fintech investment in fintech via the Portag3 fund isn’t the first time Montreal’s Caisse de dépôt has shown in interest in the market segment.

Last year, the Quebec pension was among of group of investors behind Luge Capital, a $75-million venture capital fund launched to develop early stage fintech companies firms and artificial intelligence applications for financial services.