IMCO's CIO Discusses 9.6% Gain in 2021

IMCO posted its 2021 results, delivering a net gain of 9.6% and outperforming its benchmark:

2021 Highlights

  • Generated 110 basis points of net value add for clients
  • Absolute returns and net value add were positive for all IMCO clients
  • Grew assets under management to $79 billion (at Dec. 31, 2021)
  • Committed to net zero greenhouse gas emissions in portfolio by 2050 or sooner

TORONTO (April 25, 2022) – The Investment Management Corporation of Ontario (IMCO) today announced that the weighted average net return of its clients’ portfolios was 9.6% for the year ended December 31, 2021, compared to a consolidated benchmark return of 8.5%. Client returns ranged from 0.1% to 11.2%, reflecting broad differences in their respective asset allocation strategies, risk tolerances and investment objectives.

IMCO generated 110 basis points of net value add for clients in 2021, and 50 basis points annualized since first launching its new investment strategies two years ago. IMCO’s assets under management rose to $79 billion at the end of 2021, up from $73.3 billion a year earlier.

“We are proud of the results we achieved for our clients this year,” said Bert Clark, President and Chief Executive Officer. “IMCO’s outperformance reflects our fundamental approach to investing. We look to buy high quality assets at fair prices and focus on long-term value creation.”

“We continue to work with our clients to build better performing asset mixes over the long-term,” Clark added. “This includes creating more access to private assets and introducing modest use of systematic leverage. Additionally, we have established new approaches to investing in each asset class with a more focused number of partners and an increased proportion of funds that are invested directly. I am pleased to see that these changes are already yielding improved absolute and relative (to benchmark) returns.”

In addition to ongoing strategy refinement throughout 2021, IMCO increased its investing activities significantly, carrying out 35 direct and co-investment transactions throughout the year while achieving numerous milestones. For example, IMCO completed its first 100% acquisition (Pulse Clean Energy), its first participation in an IPO (Definity Financial), and its first take-private deal (AusNet Services).

“We have the internal expertise and world-class partners in place to deliver the sustained and long-term returns our clients require,” said Rossitsa Stoyanova, IMCO’s Chief Investment Officer. “Our results speak to our focused approach, which includes a fundamental approach to investing at the individual security level, coupled with strong portfolio construction advice and management.”

Highlights of results and achievements

Portfolio performance by asset class

(as of Dec. 31, 2021)

Transaction Highlights

Key transactions in 2021 include an investment in a major life sciences development at Harvard University alongside Tishman Speyer; the acquisition of Pulse Clean Energy, a UK-based sustainable power company which will serve as a platform for a utility-scale battery business, and a number of significant capital allocations to best-in-class global private credit and private equity managers. Highlights across select asset classes include:

Private Equity

  • IMCO’s private equity team closed $2.3 billion in transactions:
    • Added four strategic partners Ardian, GI Partners, KKR, and Peloton Capital Management: making four new fund commitments totaling $1.5 billion
    • Completed seven direct equity and co-investment deals with new and existing partners totaling $800 million, including a direct investment in Kohlberg & Company’s acquisition of Ob Hospitalist Group, the largest obstetric hospitalist services provider in the United States; and co-investing alongside GI Partners’ acquisition of Valet Living, amenity services provider to multi-family properties in the United States.

Global Infrastructure

Real Estate

  • IMCO invested directly alongside our strategic partner Tishman Speyer in the US$1 billion development of a mixed-used research campus at Harvard University, following our US$325-million commitment to the Breakthrough Life Science Property Fund. The 14-acre site includes 900,000 square feet of life sciences labs, hotel, conference, and residential uses.
  • IMCO committed $225 million to 12 industrial development projects totaling over 9.4 million square feet throughout the United States, via its joint venture with WPT REIT.
  • IMCO increased its commitment to a joint venture co-sponsored by Lincoln Property Company’s residential division and Cadillac Fairview, focused on developing and acquiring high-quality multi-family assets in top U.S. markets.

Global Credit

  • IMCO closed a US$500 million commitment with a new strategic partner, Ares Management Corporation, giving IMCO and our clients timely access to an actively managed, diversified multi-strategy credit portfolio that spans a wide spectrum of credit products and markets.
  • IMCO added a direct lending component to its global credit strategy by investing US$500 million with Antares Capital LP, a private debt credit manager and leading provider of financing to mid-market private equity-backed companies in North America.

Public Equities

  • IMCO made its first investment through an initial public offering in the $1.6 billion Definity Financial offering—Canada’s biggest IPO since 2015.
  • IMCO launched two new equity pools: the Global Public Equity Pool and the Emerging Markets Public Equity Pool. Combined with the Canadian Public Equity Pool, the three pools represent approximately $25.2 billion in AUM, offering new clients access to a range of public equity strategies.

Public Market Alternatives

  • IMCO launched the Public Market Alternatives Pool in 2021, combining assets and providing portfolio construction benefits and portfolio management efficiencies, as well as better liquidity management.
  • IMCO also implemented a natural resources strategy for diversification and introduced credit long/short strategies in 2021 to take advantage of relative value opportunities in the credit markets.

Our commitment to ESG and Net Zero by 2050

IMCO also made considerable progress on embedding ESG in its investing approach in 2021, reflecting the organization’s commitment to building a sustainable, low-carbon future and a stronger and more resilient global economy. IMCO also joined the Paris Aligned Investment Initiative on Climate Action, pledging to achieve net zero portfolio green house gas emissions by 2050.

Investment Costs

IMCO delivered $20 million in investment management cost savings on behalf of clients, in addition to significant cost savings delivered in prior years. “Our goal is to offer our clients a more cost effective and better solution than any alternative available to them,” Clark said. “We’re proud of our ability to eliminate expenses, even as we continue to invest in growing and maturing our internal capabilities in areas such as client service, risk management and portfolio construction.”


The Investment Management Corporation of Ontario (IMCO) manages $79 billion of assets on behalf of its clients. IMCO’s mandate is to provide broader public sector institutions with investment management services, including portfolio construction advice, better access to a diverse range of asset classes and sophisticated risk management capabilities. IMCO is an independent organization, operating at arm’s length from government and guided by a highly experienced and professional Board of Directors. Follow us on LinkedIn and Twitter @imcoinvest.

These are solid results:

Earlier today, I had a chance to talk to IMCO's CIO, Rossitsa Stoyanova to go over these results.

I want to begin by thanking her for taking some time off her busy schedule to talk to me and also thank Neil Murphy, Vice President Corporate Communications, for setting this call up.

Before I get into my call with Rossitsa, a little background on her for people who don't know her:


Rossitsa leads IMCO’s investment team and oversees all global investment activities, including portfolio construction, asset allocation and strategic partnerships. Prior to IMCO, Rossitsa was Managing Director and Head of Portfolio Design & Construction at CPP Investments where she led the portfolio design and construction team and oversaw the fund’s risk appetite and allocation. Previous to CPP Investments, she was at GE Energy Financial Services where she was responsible for due diligence and structuring acquisitions in the power sector. She also worked in Assurance and Advisory Services at Deloitte & Touche in Chicago.


Rossitsa holds a BBA from Saint Mary’s College in Indiana and an MBA from the Kellogg School of Management at Northwestern University in Illinois.​

This was the first conversation I had with her since she started working at IMCO a little over 7 months ago and my first impressions were she's a very sharp, experienced and nice lady who really knows her stuff.  

She told me that she had a lot of experience working across public and private assets at CPP Investments and it shows.

Now, I began by asking Neil if their annual report is out yet and he told me it will be released on Friday and will be available here.

No problem, the press release above contains the important information and deals for each asset class so I focused my attention on that.

Rossitsa then gave me an overview of last year's results:

"We are pretty proud of our results, especially the net value add. We generated positive net value add for all of our clients for two years since we launched the new strategies. Our assets have grown to $79 billion. And if I were to characterize the year, we've been on the road to becoming more active, more private and internalizing our asset management. So, some of the highlights, we've increased our exposure to private assets like private equity, infrastructure, real estate and private credit. We invest mostly with GP partners, so we invest in funds and alongside our strategic partners -- co-investments and directs -- again in private equity, infrastructure, real estate and private credit. The other highlight is we want to capitalize on the energy transition. It is happening in all of the economy and we see risks and opportunities and we started on that front with our investment in Pulse Energy (used to be called Green Frog Power and was renamed Pulse Green Energy; see details here). Lastly, I will touch on the topic of real estate, an asset class which was in transition last year. We disposed of some of our regional assets in Canada and we have diversified the portfolio by investing in industrial (logistics), multi-family (residential) and life sciences, mostly in the US with strategic partners. We think the portfolio has turned the corner and is moving in the right direction."
I note IMCO's Real Estate portfolio was up 13% last year, well above the 4.2% benchmark, and the two-year actual is a touch negative (-0.3%) but now outperforming its benchmark over that time period which is -1.7%. 

The important thing is the Real Estate portfolio is diversifying out of Canada (into the US mostly) and in the right sectors, namely, logistics, multi-family and life sciences.

Here I will give credit to Andrew Garrett, Senior Principal, Real Estate and his team for working hard to diversify this portfolio.

Next, we talked about Infrastructure where I note the portfolio delivered a solid return of 12.3% but it underperformed its benchmark which delivered a gain of 21.7% last year. Over a two-year period, however, the Infrastructure portfolio is up 6.8%, beating its benchmark which was up 4.6%.

I told Rossitsa: "That benchmark seems wrong to me, it's based on publicly listed infrastructure and doesn't reflect the true nature of this portfolio which is made up of assets offering stable returns."

She responded:

 "I actually have some benchmarking experience before I joined IMCO.I think it's very challenging to pick the right benchmark for infrastructure. In fact, it's challenging to pick the right benchmark for any private asset class. Our Infrastructure benchmark is the Dow Jones Brookfield Infrastructure Infrastructure Index which is a very diversified index. It doesn't really represent our portfolio but it's a fair benchmark. I'm not going to say it's perfect but among alternatives, it's okay. Now, the way I think of Infrastructure and other private market asset classes, the long-term returns matter, and so we are happy with the performance of our infrastructure portfolio. If you look at 2-year results, both the asset class and the benchmark made more sense. Year over year, there will be more variability because the Dow Jones Brookfield Infrastructure Infrastructure Index is obviously a public market benchmark."

I interjected: "Exactly, when you see the returns of a benchmark like this -- and I too have worked on benchmarks in the past -- you know there's a lot of beta in there."

In my professional opinion, IMCO should get rid of this benchmark and find something more appropriate which reflects the nature of its Infrastructure portfolio. This is by far the toughest Infrastructure benchmark to beat on years where markets are doing well, and it was the toughest benchmark to beat among its peer group. 

Still, Rossitsa is right, on any given year there will be variability but over the long run, that is where you will see the value add of their Infrastructure portfolio instead of keeping it in some publicly listed infrastructure assets. 

Tim Formuziewich, Managing Director of Infrastructure and his team are doing a great job and Rossitsa highlighted some of the deals in that asset class:

 "For us, Pulse Energy is the first platform investment which means we own it 100%, and it's also a representation of our energy transition strategy. The reason we did this investment is there are diesel generators that are connected to the grid in the UK that deliver energy when the wind doesn't blow. Our strategy for that investment is to convert generators into batteries and use them to store energy from the grid, so basically charge the batteries when prices are low and there's not that much demand for energy and then sell them back t the grid when prices are high which means we get attractive returns but we also contribute to the stability of the grid in a clean way. So that's the strategy around Pulse. The other major strategy we did in Infrastructure was with Brookfield, participating in the take-private transaction of AusNet Services which is the transmission line in Australia."

Next we talked about Credit, an important asset class at IMCO headed up by Christian Hensley, Senior Managing Director Equities & Credit, and Jennifer Hartvisksen, Managing Director of Global Credit,

I asked her how challenging is it for Credit as we move away from the massive stimulus phase and how important are partnerships in that asset class. She replied:

"For Credit, the big investments we made among many smaller ones is we committed US$500 million with Ares Capital and also US$500 million with Antares Capital, the CPP Investments' platform for mid-market lending in the US. With Credit what we are doing is investing alongside our partners and the focus on the future is to grow our private credit portfolio. Our Credit mandate is very wide which allows us to move in many market segments as opportunities arise. Right now, we are pivoting to floating credit, so we reduced the duration of our credit portfolio in anticipation of interest rates rising. Floating-rates are typical for the leveraged buyout transactions (floating-rate debt to hedge against rising rates)"

We then took a step back where I asked Rossitsa about her experience at CPP Investments and how does sees the are the main challenges and opportunities at IMCO:

"I've been here 7 and a half months and I've been very busy but they have been enjoyable months. I think what helped me with my previous experience is that at CPP Investments, I had a lot of experience working across public and private markets which is definitely helping me in the CIO role because I understand all the asset classes we have. Joining IMCO was very exciting for me because I saw it as an opportunity to take the investment strategies to the next level. What I find at IMCO is our strategies both on the public and private side are set up appropriately and what I mean by that is the strategies are very clear and they cover the spectrum of investments of the underlying strategy. For example, in Credit, the mandate is all the way from public investment grade to private structured credit. I think that's the right setup for strategies because it gives the investment team the opportunity to cover the whole spectrum of investments with in their strategy and also pivot as market opportunities change and also create a very resilient portfolio. That's true for private equity too where we are doing mostly leveraged buyouts and growth equity but we do everything from directs and co-investments in between. So, I find the way the strategies were set up, our setup, is the right way to do it and IMCO is on the path of getting more active and more internal which is really important for private asset classes because access to privates is difficult for our client son their own. Another thing, at IMCO, we are looking for strategic partners in every asset class, so are we are not competing with our strategic partners, we choose them and then invest alongside them."

The last part of choosing the right strategic partners and investing alongside them is critical at IMCO because unlike their large peers, they do not have global offices so they need those strategic partnerships with firms that have people on the ground there.

Rossitsa added: "Even with Pulse in the UK, we own it 100% but there we found the right management team."

I asked if they would shy away from taking another management team internally and she said: 

"No, we wouldn't shy away from it but it's not the bread and butter of our strategy (investing alongside strategic partners). If I were to guess where we would do that again it's on the energy transition thesis because our focus is there. So, even though we invested in the Brookfield Global Transition Fund, if we find a place where we can do it on our own in the energy transition space, we would examine that option carefully. "

We shifted to a discussion on ESG investing and where IMCO is in terms of responsible investing:

"ESG is really important at IMCO. We think we can make it one of our comparative advantages and really differentiate ourselves there and it's very important to our clients, so they are aligned and that helps. The other thing is that helps and puts IMCO in a unique position is we don't have legacy assets because IMCO is new. Just like everyone else, we need to think about the risks in our portfolio but we also need to think about the opportunities like in energy transition. ESG is integrated in everything we do so it's very important to us. We look at ESG criteria for every investment we make and underwrite it based on our views not only on where the investment is today but on how we can improve it over the E, S and G criteria. As I sated before, we are specifically focused on climate change and energy transition but all the criteria of ESG are important to us. We will issue our first ESG report in June. It is our first report -- our peers have been issuing them for a few years now -- but I think we are starting from a good foundation and now we can start building on our expertise to make ESG one of our differentiators for our clients."

I told Rossitsa, PSP issued its inaugural Climate Strategy last week and I had a chance to talk to their CEO, Neil Cunningham about it. 

What worries me is responsible investing is a process, every pension has to take its time to do it right but some of the climate advocacy groups are way too critical and demanding every large Canadian pension makes hard commitments as soon as possible.

Anyway, Hyewon Kong is Vice President, Head of Responsible Investing, at IMCO and I'm sure she's doing a great job and is working hard putting the final touches on this first RI report coming out in June.

Rossitsa was clear: 

"When it comes to responsible investing, we are very thoughtful and science based. We are not going to make any sweeping statements. We will give some results of what we are doing instead of promises. So one of the things you will see from our ESG report is we have not set targets but we will next year. In next year's report, we will set our target for both reducing emissions in our portfolio and also defining what we would consider to be sustainable investments and putting targets on deploying capital into sustainable investments. That's what we are focused on right now. As I stated before, we will also invest in assets which are not green today but we have a clear picture on how we will transition them into green assets. We think it will be beneficial for returns but we have so many assets that can be transitioned, we think it's the responsible thing to do."

Lastly, I couldn't resist to ask Rossitsa her market views given I see things getting a lot more difficult in the economy and markets. She replied:

“You know, we are a long-term investor. What I mean by that is our objective is to build a resilient portfolio that can withstand a recession you are describing. I don't think you can plan your strategic asset allocation based on a recession because that is a shorter-term event. However, you need to withstand the recession and what I mean by that is you need to ensure you have the liquidity to weather it. I think our portfolio is in a good position to weather a recession if it were to materialize. What we are positioning for is we believe inflation will remain elevated for mid to longer term (10 years) and we will consider whether our current strategic asset allocation makes sense for that environment. We think inflation and rates will be higher than they were in the last ten years" (she said the same thing in a Bloomberg interview on Monday which you can read here).

She added:

"Another thing on our agenda to consider is how do we access emerging markets considering what happened with Russia invading Ukraine. How do we consider tail risk in emerging markets and address it? So, no solution there and we don't have a huge exposure to emerging markets but it's a time to consider heightened geopolitical risk and also in light of our ESG criteria."

I thank Rossitsa Stoyanova for a very illuminating discussion. She's a terrific CIO who has a great investment team backing her up (sorry, I couldn't mention everyone here).

I ended by wishing her a Happy Orthodox Easter which we both celebrated this past Sunday (she is Bulgarian).

Alright, let me wrap it up there, hope you're enjoying these comments as much as I do.

Below, a discussion featuring Bert Clark, CEO of the Investment Management Corporation of Ontario (IMCO) and Rashay Jethalal, CEO of CEM Benchmarking and  discussing the case for scale.

I covered it in detail here but it's worth watching it again. I look forward to catching up with Bert another time. He should be proud of his team at IMCO, things are coming together nicely.