On Tuesday, the Investment Management Corporation of Ontario (IMCO), which manages $73.3 billion in pension assets for public sector clients in the Ontarian province, announced the successful close of its $500 million to Ares Management Corporation, the publicly listed alternative investment manager of $207 billion in client assets. The half-billion-dollar commitment will give IMCO’s Global Credit segment access to an actively managed, diversified multi-strategy credit portfolio.
IMCO says it has allocated $400 million of the total amount to a Fund of One structure, and the remaining $100 million to the Ares Pathfinder Fund, a flagship global alternative credit fund targeting assets that generate “predictable and contractual cash flows throughout market cycles” (e.g. real assets).
In a statement, IMCO Global Credit Managing Director Jennifer Hartviksen pointed to Ares’ investment track record of more than 20 years, its depth and breadth of capabilities, and its expertise across asset class as representing “the kind of strategic partner we want” in growing a portfolio of global credits.
“IMCO’s strategic partnership with Ares is well-aligned with our diversification strategy and enables our clients to gain global access to a wide spectrum of credit products and markets—both liquid and illiquid, public and private,” Hartviksen said.
Ares manages capital for some 1,100 institutional investors, including pension funds, sovereign wealth funds, university endowments, charitable foundations, financial institutions and family offices, with operating groups investing across Credit, Private Equity, Real Estate and Strategic Initiatives. Its Pathfinder fund invests in alternative credit assets that are often sourced in the financing gaps found between the credit, private equity and real estate sectors.
IMCO’s Global Credit portfolio (which was created as a separate asset class in 2020) invests in public and private credits across corporate, real estate, infrastructure, emerging markets, structured and IP royalties. As of year-end 2020, the portfolio had CAD 4.6 billion (about $3.8 billion) in pension assets under management, and hopes to nearly double that amount, targeting CAD 8 billion (around $6.6 billion) in AUM by 2025.
“We are very excited to partner with IMCO and leverage our credit market leadership position to manage this strategic mandate,” said Michael Arougheti, Chief Executive Officer and President of Ares. “We designed this customized solution together with the goal of capitalizing on our all-weather approach to take advantage of opportunistic dislocations and market inefficiencies. We believe that this will provide IMCO with the flexibility to achieve their clients’ risk-reward objectives across both public and private markets.”
“The COVID-19 pandemic has exposed financing gaps in public credit segments for hard hit sectors seeking to address long-term solvency challenges,” added Hartviksen. “IMCO’s $400-million commitment to the Fund of One, and our $100-million commitment to Pathfinder positions us well to quickly respond to the demand for more bespoke capital solutions created by the current market and economic environment.”
The managers of Ares’ $3.7 billion Pathfinder Fund, which closed to investors in March, have committed to donating at least 10% of the Fund’s carried interest profits to global health and education charities, and the firm says it will partner with non-profit organizations that it has identified with a track record of delivering high value per charitable dollar contributed. Ares believes Pathfinder is the first institutional private investment fund to utilize a predefined structure to make such a substantial commitment to charitable activities.
Upon the fund’s close in March, Ares reported that Pathfinder attracted strong interest from over 80 global investors with representation across North America, Europe, Asia, Australia and the Middle East diversified by type across public and corporate pension funds, sovereign wealth funds, insurance companies, endowments and foundations, family offices and asset managers. Per Ares, the fund was well-received by new and existing firm, with just over one-third of commitments coming from investors new to Ares.