AIMCo, the $160 billion asset manager for pensions, endowments, and insurance groups in Canada’s western province, is taking a unique approach to managing its private assets. Unlike other investors, AIMCo’s client funds are able to decide their own asset allocation and many have already reached their targets in private markets. Instead of simply investing more capital, the investment team is now focused on comparing opportunities across assets and predicting future trends.

Marlene Puffer, who joined AIMCo as CIO in 2023, emphasizes the importance of a long investment horizon for these assets and the challenges of rebalancing in the future. The total portfolio approach adopted by AIMCo aims to tap into sufficient risk while protecting against excessive connected risk. Cross-functional discussions and risk analysis support smart decision-making and help prevent unintended consequences.

The team is exploring how different themes cut across various asset classes, with AI being a prime example. AI is prevalent throughout the portfolio, particularly in the red-hot demand for data centers in private markets. These data centers encompass elements of infrastructure, real estate, private equity, and renewable energy, highlighting the interconnected nature of investments within the portfolio.

In addition to AI, AIMCo’s total fund approach is guided by principles such as global diversification, a focus on Asia, integrating climate and new energy opportunities, and fostering strategic partnerships. Puffer stresses the importance of collaboration and breaking down silos to achieve success in this approach.

Following losses during market volatility induced by COVID-19, AIMCo has revamped its risk culture to ensure better risk governance and collaboration. The investment process now involves a thorough two-step analysis for any new addition to the portfolio, with input from various teams including investment, risk, legal, and sustainable investing. Governance structures have been strengthened, with the board overseeing risk parameters for every product and setting risk tolerance levels.

New hires like Kevin Bong and Suzanne Akers have brought fresh talent and leadership to AIMCo, enhancing due diligence processes and risk assessment. The emphasis on psychological safety, open dialogue, and team building has fostered a culture of trust and understanding within the organization, ensuring alignment towards strategic goals.

Private credit is a key focus area for AIMCo, with a $7 billion portfolio that requires continuous expansion and development of large-cap partnerships. Scaling in small cap investments can be challenging due to the time and resources required, prompting a shift towards larger deals that can feed the portfolio more effectively. Despite concerns about interest rate fluctuations, private credit remains a valuable asset class for AIMCo due to its return profile and exposure to credit spread.

Looking ahead, AIMCo is eyeing opportunities in Asia through its Singapore office, with a focus on partnerships in renewables and diversified infrastructure. The ability to execute deals efficiently and leverage co-investment opportunities with partners sets AIMCo apart in the private credit space, positioning the organization for continued success in the evolving investment landscape.