Investment Management Corp. of Ontario, a money manager for pension funds in the Canadian province, has committed US$500 million to Ares Management Corp. as it looks to boost its higher-yielding credit operations.
The pension fund said it’s investing US$400 million to a customized portfolio, with the goal of capitalizing on Are’s all-weather approach, taking advantage of opportunistic dislocations and market inefficiencies. The remaining US$100 million will be allocated to the flagship Ares Pathfinder fund.
“Ares can offer us, over time, high yield, leveraged loans, structured credits, and then into the private credit space, middle-market lending. They have the ability to provide capital to parts of the market that are in dislocation,” Jennifer Hartviksen, managing director for global credit at IMCO, said in an interview.
Hartviksen was brought in from Invesco Ltd. last year to build out IMCO’s global credit strategy, which currently invests in corporate bonds, real estate, infrastructure, emerging markets, structured and off-balance-sheet products such as loans backed by intellectual property to generate higher risk-adjusted returns. She said that by investing through Ares, the pension fund will have the ability to move between different segments as the opportunities present themselves.
“We view them as a foundational block of the credit strategy as we built it out,” Hartviksen said. “A platform partner that will provide a customized credit strategy in a fashion that is cost-effective and allows us to really leverage their scale and get the efficiencies that come with that.”
Last May, the pension fund committed US$250 million to a dislocation fund by Apollo Global Management Inc. focusing on bonds and loans that had fallen because of liquidity-driven selling rather than for economic reasons. Imco has closed its investment with Apollo after getting the expected returns, she said.
The pension manager for government workers in the Canadian province manages $73.3 billion in assets. It plans to boost its $4.6 billion credit portfolio to at least $8 billion over the next four years.
“It’s a combination of growing the assets under management and also repositioning into something that is more global and more diversified,” Hartviksen said.
IMCO was created less than five years ago to consolidate several public-sector funds under one manager. It’s still in the process of building its investment team and diversifying the assets it inherited.
The pension manager for Ontario posted an overall gain of 5.4 per cent for 2020. The credit portfolio returned almost twice as much at 10.6 per cent.