July 6 (Bloomberg) -- Alberta Investment Management Corp., a Canadian pension-fund manager with C$68.8 billion ($71.5 billion) in assets, expects to make six deals in areas such as real estate and infrastructure this year to increase returns, Chief Executive Officer Leo de Bever said.
“In the next year, my guess is you’re going to see half a dozen transactions ranging from C$100 million, C$200 million to maybe the biggest one being C$500 million,” de Bever said in a July 4 interview in Toronto. “I don’t want to make transactions just for the sake of making transactions; they have to be good deals.”
AIMCo, as the Edmonton, Alberta-based fund is known, is seeking to increase returns while it reorganizes into more of a commercially based investment fund like Ontario Teachers’ Pension Plan. AIMCo was established in January 2008 to manage investments for Alberta’s provincial government, public pension plans and endowments, including the C$15.5 billion Alberta Heritage Savings Trust Fund.
The fund had an 8.2 percent return on investments in the year ended March 31, generating C$5.4 billion in investment income, according to annual results released yesterday. AIMCo’s assets at the end of March fell 2.7 percent from C$70.7 billion in the year-earlier period.
“It’s not as good as I would like it to be,” de Bever said. “Where we lost a bit of money was in having to spend money in the last fiscal year to put us in a better position to make money going forward.”
Over the last three years, AIMCo has almost doubled the number of investment professionals it employs, from 138 in 2008 to 260 today, according to the annual report. The firm’s results missed the 11 percent annual return of Canadian pension funds for the period ended March 31, as estimated in an April 20 report by RBC Dexia Investor Services. Canada’s benchmark Standard & Poor’s/TSX Composite Index advanced 16 percent in that 12-month period.
AIMCo managed about C$50 billion in balanced funds, which posted a 10 percent return. That was partly offset by a 3.1 percent return in government funds, which accounted for C$18.9 billion of managed assets.
De Bever said he’s looking for “mid-sized opportunities.”
“We look for opportunities anywhere, but they have to provide stable, long-term returns,” de Bever, 63, said. “In real estate, we’re looking at Europe and the U.S., because we see some good opportunities there.”
Foreign properties may rise to one-third of total real- estate holdings “over time,” AIMCo said in its annual report. AIMCo’s C$5.6 billion in real estate is mostly in Canada, with 3.5 percent in the U.K., U.S. and Europe.
‘A Little Nervous’
Opportunities to invest in private assets, particularly infrastructure, may shift back to North America as governments such as California run short of money to get things built.
De Bever said he’s “getting a little nervous” about Latin America because assets are becoming pricey. He’s wary of emerging economies.
“We’re looking across the board, but I’m a little nervous about India because of the disorganization on the government side, and in China -- where there’s a lot of infrastructure opportunity -- I’m not sure what my legal remedies are,” de Bever said.
AIMCo will probably skew more to private holdings in the future, de Bever said.
“The shift will be to trying to earn more return from places that give us a comparative advantage, and that is private equity, infrastructure and so on, where cash and patience count for a lot,” he said.
De Bever also said he’s expecting “rough weather” for bonds after three decades of “phenomenal” performance.
“I think people have gotten used to returns in fixed income that cannot be sustained going forward,” he said.
De Bever said he’s aiming to “drive down costs to an absolute minimum” as he reorganizes AIMCo to be more like other Canadian pension plans.
“We shouldn’t be spending money unnecessarily in the long run,” he said. “We should be positioning this organization to be as good as any in this space two or three years from now.”
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--Editors: Steven Crabill, Josh Friedman
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