Looks like the typical CBC hit piece: hindsight bias galore!
LBO firms often make money but they do not make money on every deal. Sometimes they go broke because of one deal or an entire sector going broke.
The CPPIB buys into a diversified portfolio of equity (public and private), real estate, and fixed income instruments.
At any given moment their portfolio is probably like mine: some investments are down and others are up.
Since they do not know what the future holds any better than the next person the reason they diversify is to increase their chances that the entire portfolio will increase over time even though parts of it won’t.
Allocating capital, whether yours or other people’s (i.e. leveraged) is hard so hindsight bias is easy especially when one has no experience and/or no skin in the game.
I started to buy Guess? in 2014 and proceeded to both make money, lose money, and ultimately make a pretty good return during a 4 year period of a falling stock price.
It all depends on when you buy and when you sell which is to say if you buy low and then sell high you can still get a decent return even if the stock chart looks bad over that period of time.
Of course, the CPPIB is not as nimble as an individual so they do not have this luxury.
I also have bought Macy’s at $21 and am grateful that I did not buy it in 2013 at $45.
Those are the type of comparable numbers the CPPIB is probably facing with the MN investment.
They bought too soon. Hell, even with Macy’s at $27 perhaps I was too slow to sell and will see Amazon eat them.
But thats the problem, yes, I could have sold at $30 recently and gave it real thought.
However, I don’t know the future so I have erred on the side of holding and possibly losing what was a quick 40% gain.
As I said, investing is hard and I wish more people would try it, along with owning a business, to see what it is like to allocate capital (money and human).