Ontario Teachers’ latest platform agreement with M&G illustrates how an increasing number of the world’s largest institutional investors are building deeper, longer-term partnerships.
Ontario Teachers’ Pension Plan’s decision to provide M&G Investments with up to €200 million to support its Margay collateralised loan obligation (CLO) platform appears to be just another vote of confidence in European structured credit. The agreement will provide capital for future CLO equity investments while supporting the continued growth of M&G’s business.
The more interesting aspect, however, lies in how the investment has been structured. Rather than acting as a conventional LP committing capital to a succession of funds, Ontario Teachers will invest alongside future CLO issuances while also participating in the long-term economics of the platform. In other words, it is backing not simply a series of investments, but the continued expansion of M&G’s franchise.
This may reflect a broader evolution in private markets. As institutional investors become larger and more sophisticated, some are looking beyond the traditional GP-LP model in favour of deeper strategic partnerships that offer stronger alignment, repeat investment opportunities and access to specialist capabilities.
The traditional private markets model has been relatively straightforward; asset owners selected managers, committed capital to successive funds and assessed performance over each fund’s life. Today, many of the industry’s largest investors have a much broader toolkit. Co-investments, separately managed accounts and continuation vehicles have all given sophisticated LPs greater influence over how capital is deployed. Strategic partnerships such as the one between Ontario Teachers and M&G represent another step along that path.
What makes the latest agreement notable is that both parties have incentives that extend beyond the success of individual transactions. Ontario Teachers gains continued access to a specialist European CLO platform while sharing in its long-term development. M&G, meanwhile, secures patient institutional capital that can support growth over multiple market cycles.
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James King, head of private & structured credit at M&G Investments, neatly captured the rationale when he described the benefit of “aligned long-term capital”, arguing that Ontario Teachers’ support would provide “a strong foundation to scale the Margay programme over time”.
For asset owners, the attraction is easy to understand. As private markets become more competitive, access increasingly matters as much as allocation. Investors are seeking relationships that provide a consistent pipeline of opportunities rather than requiring them to compete for capacity every time a new vehicle comes to market. Long-term partnerships can also improve alignment by ensuring that both parties have an interest in building a successful investment platform over many years.
They also allow institutional investors to back areas where specialist expertise is critical. European CLO investing demands extensive credit research, portfolio construction capabilities and experience managing through different points in the credit cycle. Rather than attempting to build those capabilities internally, investors can partner with established managers that already possess the necessary infrastructure and track record.
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This is not to suggest, of course, that the traditional GP-LP model is disappearing. For the vast majority of institutional investors, commingled funds will remain the primary route.
Nor should every strategic partnership be viewed as evidence of a fundamental shift. Deals of this nature remain the preserve of the largest and most sophisticated institutions with sufficient scale to negotiate bespoke arrangements and commit meaningful capital over long time horizons.
Ontario Teachers is not alone in pursuing this type of relationship. Earlier this year, Dai-ichi Life acquired a strategic stake in M&G as part of a wider partnership designed to deepen collaboration across public and private markets.
Ontario Teachers itself has pursued similar structures before. In 2021, its real estate arm, Cadillac Fairview, joined PSP Investments and Long Harbour to create a £1.5 billion UK build-to-rent platform. Alongside the enlarged joint venture, Cadillac Fairview also acquired a minority stake in Long Harbour’s operating platform, reinforcing a long-term strategic partnership rather than a conventional investment in underlying assets.
Increasingly, leading asset owners are looking beyond individual fund commitments and asking how they can build relationships that provide enduring access, stronger alignment and greater flexibility. The GP-LP relationship is becoming less transactional and, in selected cases, more strategic.
Ontario Teachers’ own comments reinforce that point. Michael Merkoulovitch, senior managing director, credit, described M&G as “a valued partner” and highlighted the organisations’ “common investment philosophy” and “strong alignment of interest” as the basis for expanding the relationship.
For the biggest asset owners, competitive advantage may increasingly be centred on securing the right long-term partnerships.