AIMCo Opens New York Office to Expand Private Credit

Allison McNeely and Paula Sambo of Bloomberg report AIMCo opens New York office in credit push:

Alberta Investment Management Corp., one of Canada’s largest pension plans, is opening a New York office as it pushes further into private credit investing.

The $164-billion pension is looking to grow its $6 billion of private credit assets by a couple of billion dollars over the next five years, chief investment officer Marlene Puffer said. Meanwhile, it’s opening a New York office to be close to many of its biggest U.S. managers.

“We’re getting much more strategic about relationships with general partners,” she said.

AIMCo is already active in middle-market private credit. It will focus on expanding its investments in large-cap private credit based in the U.S., aiming to do co-investments alongside fund commitments, Puffer said.

AIMCo’s office at One Vanderbilt, near Grand Central Terminal, is opening with five professionals focused on private credit and one on private equity, with plans to grow to around 25 to 30 people in the next five years, she said.

The Alberta pension plan hired David Scudellari in 2023 as head of international investment.

Private credit has grown into a US$1.7-trillion asset class as higher interest rates have drawn investors and bank financing for deals has dried up.

AIMCo invests on behalf of 15 pension, endowment and government clients in the oil-rich Canadian province.

Earlier today, AIMCo issued a press release stating a US presence expands investment

New York/Edmonton – The Alberta Investment Management Corporation (AIMCo) today announced that it has further expanded its global footprint by opening an office in New York.

“Our physical presence in important financial markets like New York greatly enhances how we source, evaluate, and ultimately execute on investments to further diversify our asset mix for the clients we serve,” said Evan Siddall, Chief Executive Officer, AIMCo. “We have a significant client mandate to grow our private credit portfolio, and having a team based in Manhattan will also help us accelerate our efforts in this key asset class.”

AIMCo’s New York office brings the firm’s total number of global offices to seven, including Edmonton, Calgary, Toronto, London, Luxembourg, and Singapore. The office in Singapore was opened in the fall of 2023. The organization’s presence in these countries provides access to deeper pools of talent that bring nuanced country- and sector-specific knowledge to secure the best investment opportunities.

“Our New York office, in the heart of one of the world’s most important financial hubs, will also provide us with the presence and proximity required to both develop and deepen critical relationships with our investment partners,” said David Scudellari, Senior Executive Managing Director, Head of International Investment, based in AIMCo’s New York office. “These relationships are a critical element of successfully executing on our investment strategy.”

About AIMCo

AIMCo is one of Canada’s largest and most diversified institutional investment managers with more than C$164 billion of assets under management. AIMCo invests globally on behalf of pension, endowment, insurance, and government funds in the Province of Alberta. AIMCo manages approximately 30 pools of capital on behalf of these clients. With offices in Edmonton, Calgary, Toronto, London, Luxembourg, New York, and Singapore, our more than 200 investment professionals bring deep expertise in a range of sectors, geographies, and industries.

Alright, so AIMCo is opening up a New York office to expand its private credit operations.

If you look at AIMCo's 2022 Annual Report, you will see the performance benchmarks for all asset classes:

In Private Debt (Credit) it's 40% S&P/LSTA Leveraged Loan Index + 40% S&P European Leveraged Loan Index + 0.90% (CAD hedged)'

According to the annual report:

The portfolio generated a 6.2% net return for the year 2022, outperforming the benchmark by 6.3%. The return was driven by a diversified, resilient portfolio consisting of primarily senior secured, floating rate loans that sit at the top of the capital structure and benefit from a rising or high interest rate environment.

The Private Debt & Loan team remains focused on credit selection, portfolio  diversification and a partnership approach to deliver stable, attractive risk-adjusted returns throughout a cycle.

I'm not sure exactly how much exposure AIMCo has to Private Debt but I reckon it's less than 3% (data isn't available in their annual report).

And they want to grow it to 5% or more of total portfolio (that's my thinking).

Now, recall AIMCo CEO Evan Siddall recently wrote a comment stating ‘shadow banks’ aren’t a problem for the financial system, they are the solution.

I shared this on the rise of private credit:

Now, I'm much more comfortable with large, sophisticated pension funds investing in Blackstone, Apollo and other large funds because they have the long investment horizon and sophistication to understand the risks involved.

Again, we have not had a serious recession in a while and if that happens, private credit will be battle tested.

That's why Pimco is taking a contrarian bet here. 

And this is why I'm reticent to recommend private credit at large to investors.

If you're going to invest in the space, make sure you go with someone experienced like Antares Capital (see recent comment where Andrew Edgell,Senior Managing Director & Global Head of Credit Investments at CPP Investments talked about how he sees private debt faring in the credit cycle ahead).

The way I see it, the problem isn't with the top funds in the space, it's with new entrants, including big banks, which I call the Johnny-come-lately funds who take a lot more risks to make bigger returns.

That's a disaster in the making and it will reverberate across the industry.

So let me be clear, I'm not worried about Apollo, Ares, Blackstone, Brookfield, KKR and other experienced funds who are underwriting their loans very conservatively. I'm a lot more worried about newer funds and even banks which are now entering the space and taking risks they shouldn't be taking at this point of the cycle.

And yes, I am still very worried about a hard landing and how this will test the asset class:

The Bloomberg article quotes AIMCo CIO Marlene Puffer as saying the Fund is already active in middle-market private credit and it will focus on expanding its investments in large-cap private credit based in the US, aiming to do co-investments alongside fund commitments.

To do this properly they need to build on their strategic relationships and the person in charge of this is David Scudellari, Senior Executive Managing Director, Head of International Investment (featured above standing at Evan's left side).  

Recall David came to AIMCo from PSP Investments where he was in charge of building up their private debt portfolio, the second best private debt portfolio in Canada right behind CPP Investments.

So David is a veteran who understands the game well and he will leverage those strategic relationships with key funds to do more co-investments in large-cap private credit, paying no fees and expanding the asset class at AIMCo.

David is also an American who originally came to Canada from New York City so now he's going back home.

If you're wondering why Canada's large pension funds open offices in strategic cities like London, New York, Singapore and other places, it's to have boots on the ground developing and leveraging off key relationships and to provide flexibility to attract top talent.

AIMCo does this well and it has to do this well because it's hard attracting talent to Edmonton or Calgary, they need to be flexible and have their best employees working all over the world.

The same goes for all of Canada's Maple Eight. Flexibility is the key.

Below, Marlene Puffer, chief investment officer at AIMCo, joins BNN Bloomberg to talk about investment landscape, and how the institutional investor navigates economic backdrop.

Marlene discusses the push in private credit in a higher for longer environment and why they're expanding their presence in the US.