IMCO Posts 5.6% Return in 2023

James Bradshaw of the Globe and Mail reports unrest in commercial real estate that detracted from otherwise solid performance has settled, hopes IMCO CEO:

The CEO of Investment Management Corporation of Ontario says he is hopeful that the turmoil in commercial real estate has bottomed out after losses on investments in the sector dragged down otherwise solid performance from the pension-fund manager last year.

IMCO reported an average return of 5.6 per cent in 2023, but missed its benchmark of 6.6 per cent, as its $9.8-billion real estate portfolio lost 13 per cent for the year, against a benchmark loss of 12.1 per cent. The pension-fund manager’s real estate investments suffered from the fact that 53 per cent of the portfolio is in office and real estate holdings, which have been hardest hit by changing habits such as remote working and online shopping.

IMCO has been gradually trimming its exposure to office and retail, redeploying the proceeds into multi-residential and logistics properties that are performing better. But with real estate deal-making at a low ebb, it is hard to revamp the portfolio quickly.

“We’re hopeful that the worst is behind us,” said Bert Clark, the chief executive officer, in an interview Thursday. “It’s still going to be an area that requires some heavy lifting on our part.”

In 2023, investing markets were volatile, as high interest rates and inflation put pressure on asset values and drove up borrowing costs, while economic and geopolitical uncertainty loomed over public markets. But the overall investing outcome was much better than in 2022, when IMCO’s investments lost an average of 8.1 per cent.

The pension-fund manager’s total assets increased to $77.4-billion, from $73.3-billion a year earlier, and IMCO also added four new clients. Its investments in public stocks and bonds returned 18 per cent and 5.8 per cent.

In 2023, IMCO “had very solid results” that are “in the range” of the pension fund’s long-term targets, Mr. Clark said. The returns better reflect the mix of assets and the investing strategy that the pension-fund manager has been building since it launched in 2017, by gradually replacing some of the investments it inherited when its clients joined with a more modern, lower-cost portfolio that takes advantage of IMCO’s larger size.

IMCO was created to consolidate investing for several public-sector pension funds and now has eight clients, the largest of which are the Workplace Safety and Insurance Board and the Ontario Pension Board. Last year, it set up new global credit and private equity pools, allowing it to combine funds contributed by different clients to make more concentrated investments in private companies and loans at a larger scale.

“We don’t have all of our clients in the asset mix that we would recommend, but we’re getting close and by the end of this year, we will be a lot closer,” Mr. Clark said.

About 31 per cent of IMCO’s assets are invested in Canada, slightly above the average for the country’s largest pension funds, which collectively manage trillions of dollars and are embroiled in a public debate about whether they should be incentivized or directed to invest more domestically.

Ottawa has said it intends to work with pension funds to encourage more investment in Canada, and Mr. Clark said it is “entirely appropriate” for government to convene a conversation about how to boost the range of investment opportunities in Canada.

“Creating more investment opportunities in Canada is a good thing for us, it’s a good thing for the country,” he said. “Having more investment in Canada in the same number of investment opportunities isn’t good for us, and I don’t know that it does anything from a public policy perspective either.”

Steve Randall of Wealth Professional also reports Ontario pensions' investment manager posts 5.6% one-year return:

The investment manager responsible for generating returns for several Ontario pension funds has reported a one-year weighted average net return of its clients' portfolios of 5.6% for 2023.

The Investment Management Company of Ontario (IMCO) has seen AUM rise to $77.4 billion in the last year, up from $73.3 billion in 2022.

The year was not as easy one with volatility in the markets and ongoing inflation, but IMCO managed to navigate the choppy waters and deliver positive returns for every asset class (led by 18% for public equities) with the exception of real estate which posted negative 13%, more than its -12.1% benchmark.

The positive tone of its latest annual report includes an additional four clients that have chosen it to manage their assets, which will add $2.6 billion in new portfolio assets.

With the important focus on a greener economy, IMCO invested over $1 billion in clean energy transition assets in 2023. This marks significant progress towards its Climate Action Plan and goal of committing $5 billion towards energy transition investments by 2027.

Private equity

It also launched its Global Credit and Private Equity Pools and its Private Equity team invested $988 million of capital across 11 direct and co-investment deals in a variety of different sectors and geographies.

"Our long-term investment approach has enabled IMCO to navigate market volatility effectively, particularly in private markets such as Global Credit, Infrastructure and Private Equity – which have shown positive performance and value add since we began investing on behalf of our clients four years ago," said Rossitsa Stoyanova, Chief Investment Officer of IMCO. "2023 was marked by significant transactions and investments in energy transition, which further diversified our investment portfolio while evolving asset class strategies in areas of competitive advantage."

The organization operates under an independent, not-for-profit, cost recovery structure, and is one of Canada’s largest institutional investors.

"We are very pleased with the overall results we achieved for our clients in 2023," said Bert Clark, President and CEO of IMCO. "In a year marked by persistent inflation and market volatility, our results reflect the success of the strategic changes we have made to clients' asset mix and our new strategies at the asset class levels."

Layan Odeh of Bloomberg also reports Ontario pension fund preaches patience in private equity's long winter:

Private equity firms have been slow to cash out of holdings and hand money back to their investors. Executives at Investment Management Corp. of Ontario say they’re ready if that trend continues.

“Most of our partners will probably say that the worst is over. We are just patient,” said Rossitsa Stoyanova, chief investment officer of the $77.4 billion (US$57 billion) Canadian pension manager. “We are prepared that we are not going to have exits for a while.” 

Private equity firms have seen a dramatic change in the investment climate since interest rates began their rapid climb in 2022. The high cost of borrowing has made it harder for them to finance new acquisitions, or find buyers for the assets they already hold at valuations they’ll find attractive. 

Still, there have been signs of a thaw in deal activity so far in 2024 now that it appears the Federal Reserve and other central banks are poised to start lowering interest rates. 

Overall, IMCO posted a 5.6 per cent return last year, underperforming the benchmark of 6.6 per cent, according to a statement Friday. The fund had positive returns in every major asset class except real estate, where it lost 13 per cent. It outperformed the benchmark in public stocks and fixed income, but undershot on private equity.

“It’s not that we saw something happening in 2023, or we were contrarians, Chief Executive Officer Bert Clark said in an interview. “We held to our long-term strategies and it worked.”

IMCO is a relative young organization, launched less than a decade ago to consolidate the management of a number of retirement funds for government workers in Ontario, Canada’s most populous province. As such, it’s still building up some of its investing programs, including private equity and private credit. 

Last year, the Toronto-based manager allocated $509 million to three new private equity partners, including European buyout funds managed by Cinven Capital and IK Investment Partners, and did nearly $1 billion in direct and co-investment PE deals. 

The fund has also been growing its credit business, investing in everything from investment grade credit to structured private credit through external fund managers and co-investments — including allocations to funds run by Ares Management, Carlyle Group and Blackstone. 

IMCO boosted its activity in private credit last year, raising it to nearly 50 per cent of the global credit portfolio as of December. Management plans to increase that to 70 per cent, according to the fund’s annual report. 

IMCO is also look for exposure exposure to the infrastructure that supports the energy transition and artificial intelligence, according to Stoyanova. Last year, the fund committed $400 million in Northvolt AB, a Swedish sustainable battery company, via convertible notes. And it invested $150 million in CoreWeave, a cloud-computing firm. 

IMCO sold some of its stakes in infrastructure funds in the secondary market and may do the same in private equity funds in the future “to make room for direct investments or to commit to the fund manager’s next vintage,” Stoyanova said.     

Office buildings and retail assets were 53 per cent of Imco’s property holdings as of Dec. 31, with a heavy tilt toward Canada. 

IMCO, which inherited a big chunk of its property portfolio from the pension funds it assumed control of years ago, has been diversifying into European and U.S. real estate, according to Stoyanova. Last year, the pension fund disposed of around $1 billion in Canadian real estate assets. “Obviously in order to transform it, we need to dispose assets to get dry powder to buy new ones,” she said. 

On Friday, IMCO issued a press release stating it posted a one-year return of 5.6% in 2023:

TORONTO (April 5, 2024) – The Investment Management Corporation of Ontario (IMCO) today announced that the weighted average net return of its clients' portfolios was 5.6% for the year that ended December 31, 2023, while assets under management rose to $77.4 billion.

Despite facing heightened volatility and ongoing inflation, all asset classes, except for Real Estate, generated positive returns. The strong investment performance for the year established a solid foundation for IMCO to execute its ambitious five-year strategy, with 2023 marking the inaugural year of this plan.


  • Delivered strong investment performance, achieving a one-year weighted average net return of 5.6%.
  • Increased assets under management to $77.4 billion, up from $73.3 billion a year earlier.
  • Selected by four new clients to provide investment management services, which will add $2.6 billion in new portfolio assets.
  • Invested over $1 billion in clean energy transition assets, marking significant progress towards IMCO’s Climate Action Plan and goal of committing $5 billion towards energy transition investments by 2027.
  • Achieved a Greater Toronto Top Employer for 2024 recognition by Canada's Top 100 Employers.
  • Launched IMCO's Global Credit and Private Equity Pools, securing benefits for clients including lower fees, better asset diversification, and lower risk concentrations.


Bert Clark, President and CEO
"We are very pleased with the overall results we achieved for our clients in 2023," said Bert Clark, President and CEO of IMCO. "In a year marked by persistent inflation and market volatility, our results reflect the success of the strategic changes we have made to clients' asset mix and our new strategies at the asset class levels."

"Last year, IMCO was also chosen by four new clients, a testament to our fundamental approach to identifying differentiated, global investment opportunities, our sophisticated risk management approach and our leading sustainable investing practices," added Clark.

Rossitsa Stoyanova, Chief Investment Officer
"Our long-term investment approach has enabled IMCO to navigate market volatility effectively, particularly in private markets such as Global Credit, Infrastructure and Private Equity - which have shown positive performance and value add since we began investing on behalf of our clients four years ago," said Rossitsa Stoyanova, Chief Investment Officer of IMCO. "2023 was marked by significant transactions and investments in energy transition, which further diversified our investment portfolio while evolving asset class strategies in areas of competitive advantage."

"Looking ahead, we’re committed to taking the long view by providing customized strategic asset allocation advice, leveraging our internalized investment management expertise, and fostering deep strategic partnerships ensuring we can deliver long-term, sustainable growth for our clients," said Stoyanova.


  • IMCO committed US$400 million to Northvolt, a leading integrated battery platform focused on the research and development, manufacturing, and recycling of sustainable battery cells and systems. This investment marked IMCO's first cross-asset-class transaction, made jointly by our Fundamental Equities and Infrastructure teams, reflecting a shared priority to manage climate change while creating long-term value and enabling the global transition to a net zero emissions economy.
  • IMCO's Global Infrastructure team committed US$750 million, together with strategic partners Sandbrook and PSP Investments, to acquire and grow NeXtWind Capital Ltd, a German-based renewable firm specializing in the repowering of European wind farms coming to the end of their useful life.
  • IMCO’s Global Infrastructure team also invested in Cellnex Nordics, a leading Scandinavian tower operator, bolstering IMCO's presence in the digital infrastructure space.
  • IMCO's Private Equity team invested $988 million of capital across 11 direct and co-investment deals in a variety of different sectors and geographies, including a co-investment alongside Kohlberg in Worldwide Clinical Trials, and a co-investment alongside EagleTree Capital in MMGY Global.
  • IMCO Fundamental Equities' team invested US$150 million in CoreWeave, a leading specialized GPU cloud provider. The company provides cloud infrastructure for generative AI, and adds risk-managed, high-growth exposure to the rapid adoption of artificial intelligence applications.
  • IMCO committed to its first direct real estate investment outside North America in Trinity House, a state-of-the-art life science laboratory project located in Oxford, England, alongside strategic partner Breakthrough Properties.

Take the time to download and read IMCO's 2023 Annual Report here, I will be referring to it.

On Friday, I reached out to IMCO to chat with CEO Bert Clark and CIO Rossitsa Stoyanova and was told by Neil Murphy: "I looked into your request. Unfortunately, and with apologies, Bert and Rossitsa are both tied up today and Monday."

That didn't sit well with me for the simple reason that I have better things to do with my time than cover IMCO's 2023 results and would have appreciated a detailed discussion on their results (if other CEOs and CIOs make time to chat with me, surely Bert or Rossitsa can).

Anyway, saves me time talking and transcribing things but just remember this, reporters are not trained investment professionals, they are not trained to analyze results in-depth, nor do they know the right way to look at things and place in proper context.

Let me begin by stating IMCO's 2023 results were decent even if they underperformed their benchmark by 100 basis points, and in line with what large Canadian peers delivered who had similar exposure to public markets (CDPQ, HOOPP).

The story remains consistent, weakness in private markets, especially real estate (where IMCO has legacy issues) and decent returns in public markets. 

And once again, the asset mix explains 99% of the returns.

Next, let's read Chair Brian Gibson's report:

It's worth noting this part:

Positioning its clients to achieve long-term growth and minimize potential losses is the cornerstone of IMCO’s approach. Over the last four years we witnessed a global pandemic, major geopolitical events, and dramatic increases in inflation. IMCO’s focus on risk management and working with clients to advise them on their strategic asset allocations have never been more important.

Next, let's read President and CEO Bert Clark's report:

I note the following:

The weighted average net return of all client portfolios was 5.6 per cent in 2023. Despite a backdrop of volatility and ongoing inflation, IMCO performed well. All asset classes, except for Real Estate, generated positive returns. 

Our results are beginning to reflect the long-term work we’ve done with most clients to adjust their asset mix and reposition our asset class strategies. We expect to see continued improvement in results over the coming years as we help all clients optimize their asset mixes and fully dispose of off-strategy legacy assets.

Now, let's look at 4-year returns by asset class and for total fund:

As shown, over the last four years, IMCO has returned 2.9% edging its benchmark return of 2.8%.

Four-year returns matter because that's what determines value add and compensation which I'll discuss below.

Needless to say, four-year results are average at best and mostly owing to IMCO's public market exposure, not to its new strategies which it fully implemented last year.

Next, let's read the Q&A with IMCO's CIO Rossitsa Stoyanova:


 Again, note the focus on long-term performance:

Taking a long-term view is essential for two reasons. First, this approach avoids the pitfalls of a short-sighted or ‘yo-yo’ strategy, which can be detrimental in a fluctuating market environment. If you consider the market volatility in the past 18 months alone, we went from public markets being depressed due to rising interest rates in 2022, to a dramatic upswing in public markets in the third quarter of 2023—a year that defied recession expectations. 

We do not time the markets or react to market events. We believe that maintaining conviction in the long-term investment strategy and asset mix, and staying disciplined in our execution is the best approach to delivering strong, sustainable, risk-adjusted returns. Second, our ability to invest for the long-term is a competitive advantage. The ability to hold illiquid assets and withstand short-term noise necessitates taking the long view. In particular, our private investments need time to mature and demonstrate results. 

We assess our investment strategies’ effectiveness over a minimum of five years. Our patient, long-term focus, beyond immediate market reactions, enables our clients to meet their financial obligations decades into the future.

I have nothing against her response, pretty much standard pension fund verbiage in Canada, everyone wants to focus on long-term especially during rough years to smooth returns and justify their compensation, but just keep in mind that IMCO only fully implemented its new strategy last year (2023) so we will only see the real effectiveness of this strategy in 2028 and beyond if we truly focus on long-term performance and value add.

What are some of the bright spots? Rossitsa notes:

Several of our private market strategies, including Global Credit, Infrastructure, and Private Equity, are generating substantially positive net value add, on an inception-to-date basis. They are on the right track to benefitting from the significant progress we’ve made in internalizing our investment activities and have yet to reach their full potential. Internalization enables us to achieve outsized returns and manage risks, which we will begin to see through the multiple direct and co-investments we’ve made this year.

Note that IMCO is still ramping up its Private Equity co-investment program and as Rossitsa stated in the Bloomberg article above, they are diversifying vintage year risk and going more direct (through co-investments) to lower fee drag.

As far as performance, from table above, over the last four years, Global Infrastructure returned 6.5% vs benchmark of 2%, Global Credit 3.3% vs 0.5% for its benchmark, and Private Equity 17.3% vs 6.9% for its benchmark.

No doubt, there is outpeformance there but the first thing that came to mind is what exactly are IMCO's benchmarks for each asset class and how are they determined?

From page 27 of the Annual Report:

I note:

The IMCO investment policy statement (IPS) for each asset class contains one market-based or custom benchmark. A benchmark is a standard against which performance can be measured. Typically, a relevant market index or a combination of market indexes is used. This allows investment managers to compare the results of active management to the results that could have been achieved passively by investing in an index. A benchmark can be used to calculate how much value an active manager has provided, and what strategies or assets affected relative performance. 

NVA is the difference between investment returns of an asset class, net of all direct and indirect costs, and its respective IPS benchmark. When NVA is positive, the strategy is said to have outperformed its benchmark. When NVA is negative, the strategy underperformed its benchmark. IMCO has a benchmark policy that governs the process of recommending and establishing benchmarks. Our Risk function is responsible for the research, analysis, and review of benchmarks. The Management Investment Committee reviews and recommends benchmarks and any changes in benchmarks to the Board, which is responsible for approving the IMCO benchmarks.

I wonder if the Board also uses independent third party experts to thoroughly review IMCO's benchmarks for each asset class, all part of what I've been discussing lately on the importance of third party independent performance audit reviews at Canada's large pension funds.

Anyway, the benchmark for Real Estate is a custom benchmark which is probably the cost of capital, the benchmark for Global Infrastructure is the Dow Jones Brookfield Global Infrastructure Index which is designed to measure the performance of pure-play infrastructure companies domiciled globally (these are listed infrastructure companies, lots of beta in this index). 

The benchmark for Global Credit is 40% ICE Bank of America Global Corporate Index and 60% ICE Bank of America Global High Yield Index, which is fine and for Private Equity it's a custom benchmark again, so no details on that benchmark.

Importantly, benchmark transparency is the hallmark of excellent pension governance. Without knowing what the benchmarks are for each asset class, how do you properly determine the net value add and whether it reflects the right risks being taken to achieve it?

Admittedly, this isn't just an IMCO issue, it's widespread at Canada's large pension funds but I would say some funds (like AIMCo and OTPP) are better than others are explaining their benchmarks.

And yes, there are no perfect benchmarks for private markets but there is a way to effectively communicate what they're trying to do and to do this properly, you need benchmark transparency.

What else is missing from IMCO's annual report?

Curiously, there's no mention whatsoever of foreign exchange gains or losses for 2023.

As shown below, IMCO primarily invests in Canada and the United States:

So what exactly are the currency gains or losses for last year? All they show is net investment returns by asset class:

Again, I found that strange as every major Canadian pension fund typically has a page or box discussing the impact of currencies on total portfolio (maybe I missed it but looked carefully and searched PDF file).

Alright, let me wrap it up with the executive compensation table and some tidbits:

First, there is a detailed discussion on compensation starting on page 74 of the annual report.

Second, it's important to note that IMCO is a relatively new fund in that it started its operations only a few years ago and it needs to attract and retain top talent to properly implement its strategy.

Having said this, Bert Clark was paid in line with his larger peers for what I deem as average four-year returns which basically matched the benchmark and unlike his CEO peers, he's still very much the new kid on the block and hasn't reached their experience yet.

As far as CIO Rossitsa Stoyanova, she's not only the highest paid female CIO in the world, her total compensation put her among the top paid CIOs in Canada and the world, period, and for average performance (she's a great CIO but let's not exaggerate these long-term results).

To be fair, IMCO is just rolling out its strategy and we will only know in 2028 after five full years of implementing this strategy its true long-term effectiveness, but man, when I see these figures for average four-year results, just doesn't sit well with me at all and I'd love to have been a fly on the wall when IMCO's compensation committee approved these payouts.

And let me be clear despite what Bert Clark, Rossitsa Stoyanova, Gordon Fyfe or anyone else thinks, I have absolutely nothing personal against anyone in Canada's pension world, I just call it like I see it. Sometimes I may ruffle some feathers along the way but I stick to facts, nothing personal.

In my world of brutal capitalism, there are no multi-million-dollar bonuses based on beating custom benchmarks over a four-year period. All there is is risking personal capital to make returns and pay the mounting bills for my growing family, so when I see these hefty payouts and then (some) pension fund managers hesitate to support my valuable contributions, it really irks me.

"Leo, you should be a CEO/ CIO of a Maple Eight Fund."

Maybe in another life but to be truthful, at my age and with what I've lived through, I have zero interest and zero patience for doing what they do, answering to Board members, tied up in dreadfully boring meetings all day which would take away time from analyzing markets and doing other things I enjoy.

So, no thank you, from that vantage point, they deserve millions because I couldn't do it and talk up sustainable investing and other agendas of the day, my focus is just making money anywhere I see fit.

I'll never win the Order of Canada, Quebec or British Columbia and I'm fine with that, I'll just focus on delivering great content on my blog day in and day out (like I said, I'll do this as long as I enjoy it).

Below,  Lawrence H. Summers, former US Treasury Secretary and Wall Street Week contributor, says the evidence is overwhelming that the neutral rate is higher than the US Federal Reserve supposes and says it would be a policy mistake for the Fed to cut rates in June. Summers speaks to David Westin.

Take the time to really listen carefully to Summers as we await the Bank of Canada decision mid-week and the Fed's decision in June and think carefully of all the risks out there, inflationary and deflationary.