A Discussion With Vestcor's CIO on Their 2025 Results
Vestcor, Atlantic Canada’s largest investment manager, is pleased to present its 2025 Investment Performance Summary report, detailing another year of strong investment performance on behalf of our clients.
2025 saw Vestcor-managed portfolios generate a net return of 8.67%, after all expenses. Assets under management grew by $1.3 billion, reaching $24.4 billion at year-end and adding $165 million in value above investment benchmarks for our clients, after accounting for costs.
Equity markets were the main driver of these strong results, with a return of 16.5% over the year. Canadian equities performed especially well, with an overall return of 32.0%. Investing in Canada is an important part of Vestcor’s investment strategies. Across all asset classes, approximately 60% of Vestcor’s assets under management are invested in Canadian companies, fixed-income investments, infrastructure, and real estate.
A full account of 2025 will be available in Vestcor’s Annual Report, which will be available in the coming months.
ABOUT VESTCOR
Vestcor is an independent not-for-profit company headquartered in Fredericton, New Brunswick. It provides global investment management services to public-sector client groups representing over $24.4 billion in assets under management as of December 31, 2025, and administration services to 11 public sector pension plans and five employee benefit plans.
Vestcor’s team of more than 175 service professionals provides innovative, integrated, and cost-effective investment management and pension and benefit administration services solutions to Atlantic Canadian clients.
Vestcor currently services the requirements of approximately 117,000 pension plan members, 46,000 employee benefits members, and over 100 participating employer groups.
Vestcor's CIO, Jon Spinney, was kind enough to share additional commentary with me:
Vestcor’s portfolio performed quite well in 2025, earning just under 8.7% net compared to a benchmark return of approximately 8%. We of course faced the same headwinds as other investors (such as modestly positive, below expectation returns in Private Equity and Real Estate), but fortunately the remainder of our portfolio generated strong results.
While our long run target allocation for illiquid assets (Real Estate, Infrastructure, Private Equity, and Private Credit) is approximately 35% for most client portfolios that we manage, we’re currently underweight that amount due to a phased long-run deployment schedule as well as better than expected distributions across much of the portfolio in the past few years, meaning more capital was returned to us than expected. Being somewhat lighter weight in illiquid strategies relative to peers helped reduce the impact of the somewhat disappointing results in certain asset classes in recent years.
In contrast to the illiquid strategies, it’s probably the case that Vestcor targets relatively higher allocations to liquid alts/absolute return strategies when compared with many of our peers (fully deployed, liquid alts would representing approximately 15% of our portfolio with potential for tactically higher allocations), and these portfolios generated particularly strong results in 2025 with a gains of about 10% - representing a return equivalent to roughly 2-3x our average risk budget for those portfolios. Our absolute return funds have been very efficient uses of risk capital over the long term.
Vestcor’s asset owners are mostly funds that would be considered mature from an actuarial perspective and additionally face significant regulatory oversight of risk exposures. As a result, our strategy has consistently been to target defensive growth opportunities while prioritizing highly diversifying strategies across the rest of the portfolio. As an example, our public equity portfolio is significantly de-risked relative to the broad market. Typically, this results in a portfolio that looks somewhat better than average in down markets, modestly less exceptional in strong markets, but with solid long run performance. Based on the portfolio’s composition, the performance in 2025 could be considered quite strong relative to our expectations for the conditions we experienced, with good contributions across most asset classes.
While we continue to deploy assets across a broad range of alternatives, our top-down strategy remains mostly unchanged, although we have significant opportunities to actively tilt the portfolio towards areas where we see the most attractive opportunities as we complete deployment to asset classes like Private Equity and Credit. In most illiquid markets, Vestcor targets a portfolio makeup of between 30-60% direct/co-investments with the remainder invested by partners, with the specific ratios varying by asset class and based on market conditions. Roughly 95% of our liquid portfolio is managed by our internal investment teams. We use this significant internal management capability to tilt our portfolio to segments of markets that we feel we have an edge – for example in certain segments where investment capacity would preclude larger investors from participating.
Finally, Vestcor remains heavily invested in Canadian opportunities – our portfolio is well over 50% invested in Canada, and we continue to look for strong Canadian opportunities across all asset classes as both direct investments as well as in partnership with other like-minded investors.
Earlier today, I had chance to discuss Vestcor's 2025 results with Jon Spinney, but before i get to that discussion some slides to give my readers an overview:
As you can read, most of the returns came from Public Equities in 2025, up 16.5%. Fixed Income returned 3.7%.
In private markets, Private equity gained 1.3% while Real Estate and Infrastructure gained 4.1% and 7.9% respectively.
Discussion With Jon Spinney, CIO of Vestcor
Earlier today, I had another great conversation with Jon Spinney, CIO of Vestcor.
I want to thank him for taking the time to speak with me. It's always a pleasure going over results with him; he's extremely sharp and experienced.
Jon began by giving me an overview of the results:
If I were just to give a 30,000-foot overview of 2025, I think we were exposed to the same headwinds that most other investors would have seen, but I'm pleased with how the team navigated that. Overall, quite pleased with the results we generated. An 8.7% net return, and solid relative to benchmark return puts us in a good situation that leaves clients in a particularly well-funded situation going forward. Overall, I would say that returns were fairly well diversified. Of course, equities were driving, by and large, most of the returns during the past year, but I think it was nice to see solid results generated across the portfolio, including absolute return, for example.
On absolute return strategies, I did notice they are more overweight in liquid alternatives than their larger peers and wondered how much of this is internal and how much of it is external.
He responded:
All internal. I would say 97% of the exposure is internally managed. We use, for your information, external managers in public markets not so much for return-seeking opportunities, but to satisfy some other requirements we have in the portfolio.
Firstly, if we're doing something that's perhaps a little bit thematic, that we might not want to do it forever. It's much more useful to do that via an external manager, as opposed to building up a team internally and then shutting it down a few years later.
Additionally, we just have to be realistic that it doesn't necessarily make sense to do everything from a team based in Fredericton, and there are certain specialized cases where we'll use external managers to do those specialized mandates.
But then I think more importantly, and the major strategy behind why we use external managers in public markets, it's a business continuity approach. We have a team here in Fredericton, or predominantly based in Fredericton, we're doing things that are high impact for the portfolio, and it would be a significant disruption if one of these teams were to experience a difficulty in continuing to operate.
We use external managers to have similar strategies to what we manage internally on behalf of clients, but if we ever have a disruption with that internal team, we're able to deploy capital quickly to someone that's already on the platform and continue generating results for clients while we deal with the business continuity implications of that team destruction over the medium term, without meaning.
So I would say what that means, practically speaking, is that every high-impact or high alpha-seeking area of our portfolio would have at least one external partner that does something similar for us at a fairly small level, and we just continue to maintain that over time. The net result is that most of our public market assets are managed internally.
I asked him if he could give me a bit of a flavour of what sort of absolute return strategies they manage internally and he responded:
Internally, it's a multi-strategy approach. I would say it includes fairly traditional equity, long/ short on both a fundamental and quant basis, merger arbitrage or a statistical arbitrage, CTA or trend-following type strategies, and we do all of that internally. So it's fairly diversified.
I'm pretty pleased with the results. And we continue to run it on a very risk-controlled basis. Our total absolute return book probably targets around three and a half to 4% annualized volatility, and to be able to generate, you know, eight to 10% returns over the long term has been quite productive.
I joked that maybe it's time they start a multi-strategy hedge fund at Fredricton. I also noted that many external hedge funds, especially multi-strategy hedge funds, did well over the last three years.
Jon replied:
One thing I would highlight on that is that with a lot of even the multi-strategy or equity hedge absolute return funds, they do have quite a fair amount of equity beta that's inherent in the strategy, whether that's 0.3 or 0.4 residual equity market exposure. We run our strategies as beta zero, pure market-neutral funds. That's one of the advantages of being able to do that internally. So, we wouldn't have tailwinds when markets are rising, but we generally speaking, haven't had the headwinds when markets are falling either.
I told him that I noticed the approach in public equities is much more defensive and asked him if that's a fair characterization.
He responded:
It's fair to say. Most of our clients are target benefit or shared risk plans, as they're called here in New Brunswick. They're very mature from an actuarial perspective, so it's prudent to be somewhat more defensive in terms of the approach overall. But in addition to that, all of our clients are subject to risk testing and risk limits that are imposed by the provincial pension regulator.
And so what that means is that in order to be able to satisfy those risk-testing limits and be able to achieve the results over the long term, we need to be much lower risk than a fairly standard, let's say, DB pension.
So I think when you actually talk about what that looks like for the portfolio overall, half of our public equity exposure would be de-risked in terms of, let's say, lower volatility or more defensive strategies. And when you look at our total asset mix, we're approximately, 30 to 33% in public equity, but because of the de-risk nature of it, it would be closer to about 25% exposure when you consider the actual risk levels.
I asked him if de-risking public equities means investing more in utilities, telecoms, banks and dividend stocks and if that means they will always underperform an S&P 500 which is more concentrated in megacap tech stocks.
He replied:
I would say, 40% of our public equity exposure is benchmarked against you would call them like low volatility, or minimum of all benchmarks. And yes, that results in sector tilts. And it does result in the fact that when markets are extremely strong, those portfolios do tend to lag behind. That was the case in 2025 as well. Low vol benchmarks lag behind the broad market. One advantage that it does give us is increases the opportunity set for active management. We've been able to beat those benchmarks fairly handily over the long term.
I shifted my attention to private markets which I thought made up 35% of the total portfolio and asked him to talk about private equity first. He replied:
Yeas, I would say the goal is to be at 35% in private markets, and that would include private equity, real estate, infrastructure and private credit. We're not there today. We're under 30% today in terms of where we're actually allocated. That's for two reasons. One is that we're taking a fairly phased, long-term approach to getting to full target size on that, not wanting to allocate too quickly during a volatile market.
And also, just to be very honest, a lot of extra capital came back from the private equity portfolio, Over the past few years, it's actually been -- I would have to go back and check the numbers -- possibly something like 40% of the NAV of our PE portfolio was distributed back to us in the last three years or so, which is fairly significant.
So, I think we've been a little bit under-allocated that way. From the point of view of the actual private equity portfolio performance, I would say nothing really different from what our peers would have seen in the past few years, difficulty keeping up with public market benchmarks, and in 2025 certainly having a little bit of tech overexposure in private equity was not favourable. So, in general, the private equity portfolio had a very modest positive return last year, certainly below long-run expectations.
I asked him straight out if they remain committed to that asset class. I also noted the distribution is quite impressive; not everybody got that type of distribution back.
He responded:
It's actually created an interesting problem where we've had to be quite aggressive on deploying capital during this period, but we'll take that problem whenever we get it. It's capital back, but it then creates other challenges. To answer your question, still committed to private equity. I think there are still significant opportunities. It's going to be a large and growing part of our portfolio. I think it's a large part of the market. I think where we're looking towards the future is being a little bit more targeted in terms of what exposures we want in the portfolio.
Historically, private equity has been very tech-heavy, focusing on certain industry types. And I think what we've seen over the past couple of years is a slightly more diversified approach might have been better. So, I think you'll see us be a little bit more diversified in the approach to private equity, and also taking advantage of the fact that as a slightly smaller fund, there are areas of the market where we're able to find investable opportunities that are probably too small for, let's say, a Maple 8 type here. I could speak to details, but I think there are opportunities that we continue to see that look attractive from that point of view.
I asked him in their private equity portfolio, how much is fund investments versus co-investments?
He broke it down:
It really depends on which private market area you're talking about. It's actually quite different across the portfolio. Private equity and private credit are the lowest in terms of how much direct we have. They would be around 30% direct or co-investments, and 60 to 70% with funds or other partners. Real estate and infrastructure are closer to 60% direct or co-investments and 40% with partners.
Next, we moved to real estate where Jon noted that some issues persist:
We've seen the same things in real estate that other people have seen, several headwinds over the past few years, whether that's central dislocations caused by work from home, maybe impacting the office space, or if it's just discount rate effects as interest rates increased over the past few years. Obviously, it's been a challenging market.
I think we've continued to navigate through that, and I think real estate continues to be a significant part of our portfolio. I think there are just certain areas of the market where net returns are probably going to be more modest going forward than we would have expected pre-Covid.
I think the carnage in office space is likely mostly over from a certain point of view, but ultimately, it's more expensive today to attract tenants to an office property. The sort of amenities that need to be offered and the sort of features that need to be in place for that to be a successful property are more expensive than we would have seen pre-Covid. Overall, what we've continued to do is ratcheted down our expectations in the asset class and focus elsewhere in private markets, from an infrastructure point of view.
I asked him if he could give me the breakdown between office, retail, multi-residential, industrial and others? He replied:
Slightly underweight office, and we've been overweight industrial and let's say last mile or corner store retail. I would say not the large, let's say significant, large malls, but let's say more corner retail. It's been something that's been a significant part of our strategy, and we're roughly market rate, market weight on multi-residential.
On Infrastructure, Jon shared this:
Infrastructure is one that's an interesting case for us because we still prioritize inflation protection above all else. Shared risk plans, target benefit plans have explicit inflation characteristics built into the liability, and anytime we're able to hedge that risk with the asset portfolio, is fantastic.
What we've seen in infrastructure is a continuing move towards, let's say, more GDP sensitive assets over time compared to what would have been most likely making up the industry 20 years ago.
I think that's created opportunities to add value. Investors that are able to bring somewhat of a private equity point of view to infrastructure, are able to fit assets into that portfolio. It does change the characteristics of it a little bit.
And I think broadly speaking, that's what we're seeing across all private asset areas, a little bit of hybridization, and what the opportunities look like in that you're struggling to find places to put certain types of investments. Are they really infrastructure, or are they private equity, or some other sort of hybrid kind of approach?
Overall, our infrastructure portfolio has been very successful, pleased with the results over the short, medium and long term. But certainly there's going to be, you know, sensitivity, certainly around things like port assets or other trade sensitive sectors that are going to have to navigate a choppy few years going forward.
Jon mentioned inflation protection and I told him a few weeks ago that I discussed how inflation is squeezing retired Nova Scotia civil servants.
He responded:
Our inflation protection, I think, is handled differently than theirs. I'm not really sure I know all the details of their model, but ours is a funding based approach, and as long as the plans are sufficiently funded, they were able to pay according to a certain cost of living formula. My understanding is over the past several years, including the inflation spike in the early 2020s our plans were essentially able to pay nearly or entirely full indexing protection for all pensioners.
We then discussed private credit where Jon shared some great insights:
I think there's lots that can be said about credit or private credit. In particular, as you mentioned, it's a new asset class for us. We've always done some private credit or direct lending within our portfolio, but it's only been in the past couple of years that we've had a dedicated sleeve with client allocations to put that in.
In the past, we struggled to find a place in the portfolio to put it. Today, we're actively deploying, ignoring the private side of things and just thinking about credit broadly.
It's fair to say that pricing is not particularly attractive as it stands today. If I look at publicly traded speculative grade credit, you know, sub 3% spreads are not particularly attractive in an environment where we're likely to see slightly above normal default rates, certainly in emerging markets and in the US. So, I think there's a reason for caution.
When I look at the media noise around private credit, in particular, a couple of things certainly come to mind. The first one, obviously, I think the industry just keeps learning a lesson over and over again about trying to fit illiquid assets into a nominally liquid vehicle. And I think when you start marketing that to private clients or individual investors, the redemption dynamics look a little bit different. And I think that's making the noise cycle, or the news cycle around what's going on in private credit even worse today.
But I think that being said, there are actual credit issues out there. I think certainly what we're seeing with the partners we're working with is it's advantageous to be able to shift your sector focus. There are significant and ongoing challenges in the software sector, and so I think you're going to be seeing private credit and that area of the market shift slightly into other areas.
It would be nice to think, or nice to see that we have, let's say, a pricing impact of the noise. What we've seen so far is basically composition of the market change more than anything else, pricing and private credit deals has been fairly steady, but really what's getting priced are the higher quality borrowers in sectors that are more attractive going forward, and the borrowers that are in more challenged sectors, or maybe in a more challenged default type situation are just not getting funded at all.
Ultimately, pricing hasn't adapted that much. The composition of the market has adapted. We're fortunate in that it's a new asset class for us, and so we're not over-rallocated to a legacy book of business that would have a significant sector impacts on what's happened in the past few years.
But it's still going to be something that requires a lot of attention to deploy in a prudent fashion over the next few years. And I would say, just to put some statistics on it, from a co-invest point of view, we probably declined about 90% of what we saw in 2025 on the private credit side of things, even from existing partners, not just not even including those ones that would just be coming in off the streets.
And lastly, I asked how they are navigating all this geopolitical turmoil and whether this is a great environment for them to be more active on the trading side, or do they find this a lot more challenging.
Jon replied:
From those two things, I'll say to that our portfolio is quite defensive. So I'm not losing a lot of sleep on a day-to-day basis in terms of how the overall portfolio will handle short-term market dislocations.
We're in a good situation in that we're trying to allocate actively to these markets that are having some fairly significant dislocations, and that allows us to be strategic and thoughtful in how we're doing things and source opportunities with attractive economics.
The paradox is that as markets become even more fast-moving, the ability to do short-term, tactical trading in a large pension portfolio is very difficult. And I think that overall, we're trying to find opportunities to tactically tilt, you know, not towards directional bets, but towards, let's say, bets that would be more favourable in any market environment. What that meant more recently is we were fairly significantly overweight absolute return throughout all of 2025 but not taking tactical tilts on equity markets, for example.
Another fantastic conversation with Jon Spinney, CIO of Vestcor, who shares great insights here for all my readers.
Once again, I thank him for taking the time to talk to me, always enjoy speaking to a CIO with strong investment acumen.
Below, the New Brunswick Public Service Pension Plan Annual information meeting that took place back in December. Take the time to watch this (it's not long) and learn more about Vestcor's strategy.
Vestcor's annual reports can be found here, and that is where they will post the 2025 annual report in the coming months.
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