IMCO outlines portfolio construction strategy in 2018 report

After starting to manage funds for its first two clients, the Ontario Pension Board and the province’s Workplace Safety and Insurance Board, the Investment Management Corp. of Ontario has released its 2018 annual report outlining its progress.

Though the investment results of its activities will be reported independently by its clients, the report delineated the specifics of the manager’s strategies. To date, however, these have been managed on a segregated basis. “We will start to provide our clients with more comprehensive portfolio construction advice and offer IMCO investment strategies in 2019,” said Bert Clark, the IMCO’s president and chief executive officer, in the report. “In 2020, we plan to migrate client segregated assets to pools that reflect IMCO investment strategies.”

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As of the end of 2018, the IMCO allocated 56 per cent to assets Canada, 22 per cent to U.S. assets, 10 per cent to Asia, nine per cent to Europe and the Middle East and three per cent to emerging markets.

As for asset classes, public equities made up the largest segment of the portfolio, at 35 per cent, representing $22.3 billion in assets. This was followed by government bonds and credit (22 per cent) and real estate (18 per cent). Lower on the list were infrastructure (nine per cent), public market alternatives (seven per cent), absolute return strategies (six per cent) and private equity (three per cent).

In 2017, the organization had yet to develop the structure and systems normally used by a multi-client asset manager, noted Clark, in the report. “Today, we are an integrated organization and we have put in place the core capabilities required to begin taking on new clients. In short, 2018 was a transformational year for us.”

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Looking ahead, the report highlighted a number of core principles for the IMCO, including prioritizing asset allocation in its investment decisions, taking costs heavily into consideration, focusing on good governance and using environmental, social and governance factors to help manage risk and contribute to long-term performance.

Currently, the IMCO manages $26 billion for the OPB and $34 billion for the WSIB. It is also discussing transitions with several potential clients and has fully established its client services model, noted the report.