Canada’s Imco eyes Asia partners in portfolio revamp

The recently set up C$62 billion public-sector fund manager plans to double its investment team, insource most assets and do more direct deals, says CIO Jean Michel.
Canada’s Imco eyes Asia partners in portfolio revamp

The Investment Management Corporation of Ontario (Imco), a recently established public-sector fund manager, plans to overhaul its client portfolio by bringing most assets in-house, raising its exposure to private markets and shrinking its roster of external managers.

Institutional investors in Asia – many of which want to strengthen their own internal capabilities – may be keen to know how Imco will do this, given how highly they regard the Canadian pension model.

They will also be interested to learn that the C$62 billion ($47 billion) manager expects its C$5.4 billion of Asian assets (mostly in public markets and entirely via external managers) to grow, as more transactions take place in emerging markets, chief investment officer Jean Michel told AsianInvestor.

Imco does not have a specific strategy to invest more heavily into emerging markets – unlike some of Canada’s heavyweight pension funds. The likes of CDPQCPPIB and the Healthcare of Ontario Pension Plan are all looking to raise their Asian allocations over time, though they are wary of the potential impact of trade tensions and other geopolitical risks.

Jean Michel

However Imco, which was established specifically to manage money for public-sector funds in Ontario invest, aims to start investing in private market investments in Asia, initially via external managers and co-investments, added Michel. 

He joined in June from CDPQ, which itself invests heavily in private markets via direct deals. While Imco has yet to make any direct investments in public or private assets in Asia, Michel expects the fund manager will develop partnerships in the region.

That said, it doesn’t plan to open any offices outside Toronto in 2019. And Michel acknowledged building private markets exposure would be challenging now, given how crowded and expensive that space is these days. 


The fund currently outsources around 70% of its assets to external managers (a figure that includes co-investments), said Michel, but it aims to flip this proportion to in-house management within three to five years.

That will necessitate a big rise in headcount. Imco has around 50 investment staff today, out of a total headcount of 110, but it wants to double that to 100 within three to five years. In November 2018, for instance, it hired Nicole Musicco from Ontario Teachers’ Pension Plan, where she had overseen public equities and before that had headed Asia, to run its private markets division.

The overall aim is to reduce costs and have more control over assets, Michel said – as is the rationale for the Canadian model. 

Nicole Musicco

Another consequence of building in-house resources will be that the firm will have fewer external partners but will deepen the relationships that remain. 


Globally, Imco is seeking to make the biggest allocation increases to infrastructure and private credit but declined to provide any specific targets. 

The fund manager includes the latter, to which it currently has $0.4 billion (0.6%) allocated, under its fixed income portfolio (see table below). It will begin reporting private credit as a separate product from 2020.  

Imco has had little exposure to private debt in the past. “The idea is to build a global credit portfolio so that we really capture that risk factor,” Michel said.

He also thinks Imco is underweight when it comes to infrastructure and expects to increase that exposure, above all in developed market assets.  


Public equities $28.4bn 46%
Fixed income and money markets $14.4bn 24%
Real estate $8.9bn 14%
Infrastructure $4.6bn 7%
Absolute return $3.6bn 6%
Private equity $1.7bn 3%
TOTAL $61.6bn 100%

On the public market side, Michel said the fund will make more use of different factors – weightings other that use measurements other than traditional market capitalisation such as value, momentum and target volatility – to try to outperform, also known as smart beta. 

“We will still be using external managers for that,” he added. Michel did not respond immediately to further questions over how much Imco would raise allocations into specific asset areas, and which of its allocations would shrink as a consequence. 

Meanwhile, Imco is revising its environmental, social and governance (ESG) policy, an area where Canadian pensions are widely seen as leaders. “Clearly we want ESG to be part of our investment process and it will continue to be a critical factor,” Michel said.


Imco was set up in 2016 to run the investments of public-sector funds in Ontario, and its first two clients are the Workplace Safety and Insurance Board of Ontario and the Ontario Pension Board. The firm is determining the asset allocation and portfolio construction strategy for its initial assets. It started operations last year.

“We want to get our asset allocation and portfolio construction right before digging down into securities selection,” said Michel. “We’re building a team that focuses on long-term asset allocation.”

Imco also wants to grow by managing money for more Canadian public-sector funds in Ontario. These could include Crown corporation pension funds, government-controlled funds and university pension funds and endowments.

“We already have the two largest funds we could be managing, but in addition to our current AUM there is close to C$100 billion of potential assets out there.” There are some funds with around C$200 million and certain larger ones closer to C$20 billion, Michel added.

Imco declined to comment on the size or pace of asset growth it is targeting.

The cover story in the October/November issue of AsianInvestor magazine featured a detailed look at how the large Canadian public pension funds are investing more in Asia.

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