Portfolio Construction: Core and Complementary Investments

Kensington does not approach every prospective investment as equally important. Experience shows that some investments are more important than others, and not simply because of their financial performance. In constructing a private equity portfolio, the Manager distinguishes between larger “core” investments as the foundation of the portfolio, and smaller “complementary” investments selected to fill gaps and maintain portfolio balance.

Core investments are selected for their own expected high level of performance, and for the additional investment opportunities they are expected to provide. For example, a core investment in a major buyout fund may lead to several direct investments in underlying companies which are shared by that fund and by Kensington in its co investment activities.

Complementary investments may also consist of smaller commitments to certain funds to complete geographic or sector allocations for portfolio balance, which are expected to be strong performers. These complementary investments complete the diversification required to effectively manage risk while providing room for compelling opportunities which do not merit larger core commitments.

Outside of Canada, Kensington uses a fund of funds as a core investment in regions where that investment can improve the portfolio risk adjusted returns, and present strong complementary investment opportunities. Kensington will also make complementary investments in select primary direct funds alongside its core fund of funds holding.

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