The C$73 billion ($60 billion) IMCO committed $500 million to Ares to boost its global credit portfolio. Of the total, $400 million will go into an Ares-managed “all-weather” customized solution, providing exposure to opportunistic dislocation and other market inefficiencies.
The outstanding $100 million will back Ares Pathfinder Fund, the Los Angeles manager’s flagship vehicle for investing in gaps in the supply of private lender capital. The fund closed earlier this year at its $3.7 billion hard-cap, ahead of an original target of $2 billion.
The Ares allocation comes on the heels of other major IMCO investments in the private debt space. In 2020, IMCO put $350 million to work in Oaktree Capital Management’s 11th distressed debt fund. It also allocated $200 million to Sagard Holdings’ second direct lending fund.
IMCO established credit as a separate asset class only last year. The ramp-up in commitments is expected to help expand credit portfolio assets to C$8 billion or more by 2025, from C$4.6 billion today.
IMCO was launched in 2016 to help Ontario public sector funds scale and gain access to private markets, taking as a model systems like Caisse de dépôt et placement du Québec. It presently oversees the assets of Ontario Pension Board, Provincial Judges’ Pension Board, WISE Trust and Workplace Safety and Insurance Board.
Along with credit, IMCO has outsized plans for its private equity strategy. It is looking to increase PE portfolio assets to C$6 billion or more by 2025, from C$2.7 billion today.
This is to be accomplished in part through fund investments. Last year, IMCO committed a combined C$1 billion to three mid-market buyout vehicles managed by Kohlberg & Company, Morgan Stanley Capital Partners and Nordic Capital.
IMCO’s PE strategy performed strongly in 2020, generating a one-year net return of 34.2 percent, Buyouts reported. The credit strategy also beat its benchmark, earning a one-year net return of 11.1 percent.