Ontario Pension Manager Plots Credit Growth, Real Estate Cutback

(Bloomberg) -- Ontario's new public fund manager is revamping its multibillion-dollar real estate portfolio, cutting its exposure to retail property, after suffering a 12.1% loss on those holdings last year.

Investment Management Corp. of Ontario, the pension manager for government workers in the Canadian province, posted an overall gain of 5.4% for 2020. Real estate losses were offset by strong returns from credit, private equity and stocks.

IMCO, which manages C$73.3 billion ($58.1 billion), was created less than five years ago to consolidate several public sector funds under one manager. It's still in the process of building its investment team and diversifying the assets it inherited.

The C$10.2 billion real estate group is one example: It's 79% office and retail space, which performed poorly because of the pandemic. "We have a portfolio that's, unfortunately, underweight logistics and multi-residential," IMCO Chief Executive Officer Bert Clark said in an interview.

The fund is trying to rebalance that, but it will take time, Clark said. IMCO has struck partnerships with firms including KingSett Capital Inc. and Dermody Properties LLC to invest in apartments and industrial properties.

IMCO is also planning to increase its holdings of global credit, which represent just 6% of assets, Clark said.

A bright spot for IMCO was its ability to push cash into stocks after markets plunged in February and March last year, he said. The fund earned 10.7% on public equities, more than double the total return of the S&P/TSX Composite Index.

"You can't be a long-term investor if you don't have your eye on liquidity," Clark said. "In those dips you won't be forced to sell, and in an ideal world you can actually be a buyer."