Alberta Investment Management Corp. reported a 4.5-per-cent gain on its investments in the first half of the year, but the pension fund manager is staying cautious against a backdrop of slow economic activity.
The half-year investment returns posted by AIMCo, which amounted to $6.1-billion in investment income, were “right around benchmark levels,” chief investment officer Marlene Puffer said in an interview Thursday. AIMCo does not disclose the benchmarks it uses to measure returns at the mid-year mark, and Ms. Puffer said lagging valuation updates for some private asset classes make timely comparisons difficult.
AIMCo has earned an average annual return of 5.4 per cent over four years, and 7.3 per cent over 10 years. The Edmonton-based manager, which invests on behalf of 17 pension, endowment, insurance and government funds in Alberta, manages total assets of $164-billion as of June 30, compared with $158-billion at the end of last year.
The positive first-half return marks a turnaround from last year, when stock and bond markets took a rare simultaneous dive and AIMCo took a 3.4-per-cent loss, driven by declines in its public-market holdings. Even so, AIMCo has taken “a fairly risk-controlled approach” so far this year, waiting for “a stronger view that rates may have hit their peak, which we’re not convinced of yet,” Ms. Puffer said.
“We’re still concerned about the economic outlook and the stickiness of inflation and the implications that that has for what may continue to remain somewhat sluggish economic activity,” she said. “We’re somewhat cautiously positioned in terms of our overall asset mix in public markets. In terms of our relative weighting of equities versus bonds, for example, we have taken the position that it’s still not time to be aggressive in the equity market.”
Public stocks, which make up one-third of AIMCo’s total investment portfolio, posted gains in the first half of the year in spite of rising rates and turmoil among regional banks in the United States. AIMCo said bonds also performed well, though the pension fund manager does not disclose individual performance results for specific asset classes mid-year.
AIMCo’s private debt and loan team was busy, closing 15 transactions worth more than $300-million through June, and its private mortgages team approved more than $900-million in new loans and renewals. But overall, it was a slower start to the year for its private asset classes – which include private equity, infrastructure and real estate, and make up 40 per cent of total assets.
Real estate, in particular, was “more muted” so far this year, as AIMCo focuses on revamping the portfolio to be more resilient and globally diversified at a moment when some parts of office and retail real estate are coming under intense pressure.
“A lot of our activity in real estate is around liquidity and cash management, really thoughtful pacing of any new acquisitions,” Ms. Puffer said. “I think the team is working on some quite creative solutions to repositioning the portfolio.”
In mid-September, AIMCo will formally open a new Singapore office, which will be led by senior managing director Kevin Bong, a recent hire who came over from the Government of Singapore Investment Corp.
James Bradshaw