National Post (National Edition)
HOW ONE ONTARIO PENSION MANAGER IS WEATHERING THE PANDEMIC.
‘ANYONE WHO SAYS ‘I KNOW WHAT YOU DO IN THIS SCENARIO’ IS MAKING IT UP’
Having kids or undertaking a home renovation has a lot in common with setting up a multi-client investment manager, according to Bert Clark, who has done at least two of the things on that list.
“You underestimate the amount of work,” the chief executive of Investment Management Corp. of Ontario (IMCO), and a father of four kids under the age of 10, said during a recent interview.
That assessment of the three-plus years he has spent building IMCO — which manages $70.3-billion worth of assets for the pensions of Ontario judges and government employees as well as the Workplace Safety and Insurance Board (WSIB), making it one of the country’s top 10 pension managers — also now applies to responding to the global coronavirus pandemic that has shut down economies and ground business as usual to a halt.
“Anyone who says ‘I know what you do in this scenario’ is making it up,” Clark said, pointing to a never-beforeseen combination of events, including negative oil prices, the shutdown on widespread swathes of the economy and significant fiscal and monetary intervention by governments around the world.
On the investment front for IMCO, the crisis has meant taking stock and embarking on a slow, measured approach to new investments. Clark said he’s also looking for partners to take advantage of the disruption. Again, he’s biding his time.
“Balance-sheet restructuring doesn’t happen in three weeks” with private assets such as infrastructure, real estate and credit, he said. “We’re waiting patiently.”
For a taste of what Clark is looking for in partnerships to propel growth in these areas, he points to IMCO’s participation in a consortium that in 2018 bought 25 per cent of a portfolio of hydro-electric assets from Brookfield Renewable Partners LP.
But before any pandemic-related deal-making gets done, he said, IMCO is likely to focus on rebalancing portfolios where market declines have pushed weightings out of whack, even if that means buying stocks when others are steering clear out of fear.
“It’s a pretty understandable psychological response, but it’s a poor investment strategy,” Clark said, adding that devising and sticking to a sound asset mix is one of the three value proposition pillars that IMCO can offer. “Whether the mix is 60/40 or 40/60 matters more than if you outperform on an asset class.”
Clark, a lawyer by training who was CEO of Infrastructure Ontario before taking on IMCO’s launch, said another pre-pandemic priority was developing a liquidity management regime that would ensure there was enough available cash to weather “an intense storm” for the duration.
“You don’t want to be a forced seller ... (It’s better) to be the one with dry powder,” he said. “You never want to have to sell … in a downturn.”
Despite the challenges presented by the global health and economic crisis, IMCO was able to add the judge’s pension to the funds it manages in mid-April, fulfilling its key role as an investment management consolidator for small public-sector funds and pensions across Ontario.
Participation in IMCO is voluntary, unlike consolidated pension managers in other provinces, such as the Alberta Investment Management Corp.
Clark’s hope is that smaller funds will choose to join in order to benefit from the manager’s scale, which reduces investing costs, as well as its size and expertise, allowing it to diversify into alternative asset classes such as real estate, private equity and infrastructure.
His sales pitch touches on a theme that’s prevalent in the pension world: companies and organizations that run large retirement plans can become distracted and pull time and resources from their primary business.
“(It’s the) same logic here,” Clark said.
At the end of December, IMCO had $11.6 billion invested in real estate, $5.7 billion in infrastructure and $2 billion in global credit, though the bulk of its funds — about $40 billion — was invested in a combination of public equities, fixed income and government bonds.
Clark said IMCO should be able to further scale up investments if other pools of money come under its umbrella.
“There are pools of public capital spread across the province,” he said, adding that his targets include 90 or so funds and pensions at universities, municipalities and Crown corporations. Together, they represent nearly $100 billion in assets under management.