The Investment Management Corporation of Ontario, Canada, the institutional investor commonly known as IMCO, announced late last week that it has closed three private equity fund commitments totaling CAD $1 billion (about $754 million).
The three funds are Kohlberg Investors IX (“Kohlberg”) managed by Kohlberg & Company; Nordic Capital X (“Nordic X”) managed by Nordic Capital; and North Haven Capital Partners VII (“North Haven”) managed by Morgan Stanley Capital Partners.
IMCO manages $70.3 billion of assets on behalf of public sector clients, including the Ontario Pension Board, the Workplace Safety & Insurance Board (WSIB) and WSIB Pension, and the Provincial Judges Pension Plan. The company provides investment management services, including portfolio construction advice, better access to a diverse range of asset classes and sophisticated risk management capabilities. While it serves a public sector client base, IMCO is an independent organization, operating at arm’s length from government and guided by a Board of Directors.
PE Push
With just CAD $1.9 billion invested in the asset class, private equity is currently IMCO’s smallest allocation. The firm has CAD $25.6 billion allocated to public equities, $14.6 billion to fixed income and government bond instruments, $11.6 billion to real estate, $8.9 billion to listed alternative investments, $5.7 billion to infrastructure, and $2 billion to global credit. Government is its heaviest sector weighting, with 21 percent of the portfolio invested in government assets, followed by real estate, with a 19 percent sector weighting.
According to a statement from the company, IMCO is aiming to grow its Private Equity portfolio to “CAD $6 billion or more”—at least a threefold increase—by 2025.
Geographically, IMCO invests primarily in North American targets, with just under half of its portfolio invested in Canadian assets. Canadian and U.S. investments together make up more than three-quarters of its regional allocation.
IMCO differentiates itself through a fundamental approach to underwriting, and focuses on the middle-market buyout segment (commonly defined as companies acquired for less than $1 billion but at least $25 million).
“Our flexibility and speed in deploying capital sets us apart in this market and are capabilities that both partners and clients value,” IMCO Private Equity Managing Director Craig Ferguson said in an official communication. “In combination with establishing strategic manager relationships, we are also scaling our direct and co-investing activities in order to drive additional growth in the Private Equity portfolio.”
The partners
Kohlberg & Co., based in Mount Kisco, New York, makes control investments in North American middle-market companies in the business services, consumer, industrial manufacturing, healthcare, and financial services sectors. Last month, the company acquired a majority state in Parts Authority, the U.S.’s leading distributor of replacement car and truck parts.
Nordic Capital, headquartered in Stockholm, Sweden, aims to make control investments in Northern European middle-market companies in the healthcare, financial services, and technology & payments sectors. Last month, Nordic announced the successful close of its tenth capital fund (Fund X), the largest in its 31-year-history at about $7.2 billion, and raised entirely remotely due to travel and in-person meeting restrictions from the covid-19 pandemic.
Finally, North Haven Partners, managed by New York-based Morgan Stanley Capital Partners, focuses on control investments in North American middle-market companies in business services, consumer, industrials, healthcare, and education sectors.
“The three firms each have a proven track record, unique sector expertise, and an operational value creation approach, representing the kind of strategic partners we want as we build our Private Equity portfolio,” Ferguson added. “As we strive to geographically diversify our portfolio in resilient sectors supported by structural tailwinds, these funds proved to be the right opportunity for us to make a substantial commitment, which we believe will generate sound results for our clients.”
