Investment funds: Aiming high

Alberta’s new investment entity will be a player.

The newish Alberta Investment Management Corp. has yet to make a blockbuster deal. Cut it some slack. It’s only been in existence since the beginning of the year. But make no mistake, this organization, which rolls together the province’s various public-sector pension funds, trusts and endowments (including the culturally significant Heritage Fund) into one investing giant, is set to emerge as a major player in Canadian capital markets in the years to come.

With a massive $73 billion of assets under management, AIMCo is the fifth-largest pool of capital in the country, and it’s being managed by a stand-alone board that will give the complex portfolio the time and attention it deserves. That wasn’t always the case when it was operated by the Alberta Treasury Department. The new structure also allows AIMCo to take its place among the other big Canadian public pension funds such as the Canada Pension Plan Investment Board, the Caisse de dépôt et placement du Québec (which manages the pension money of Quebec government employees) and the Ontario Teachers’ Pension Plan (which invests the money of, well, Ontario teachers).

These massive funds have become key players in global markets (especially in private equity), and observers should expect some scraps between them. “There will be a competitive tension between these funds when it comes to relative returns,” says Charles Baillie, the founding chairperson of AIMCo and formerly CEO of TD Financial Group. “But I could also see Teachers’, AIMCo and CPPIB getting together to do some big deals.”

AIMCo certainly represents a maturing of the Albertan economy, which willbenefit from the financial “centre of excellence” that the government stipulated must be created in Edmonton along with the fund’s creation. AIMCo’s goal is to stand out in terms of governance and transparency (and it will try to go beyond the current bar set by Teachers’), while bringing Alberta money to the table — as befits a real economic power centre. “There is a new sense of self-confidence in the province today,” says Baillie. “When I started my career, Calgary was the No. 4 centre for business for head offices in Canada. But when I ended, it had moved up to No. 2.”

Case in point, one of AIMCo’s recent deals was backing StoneGate Landing, a new retail, office, industrial and hospitality development that covers more than 1,100 acres in northeast Calgary. The $3-billion project is expected to be copleted by 2016 and is the largest commercial development of its kind in Western Canada.

Of course, residents of the Wild Rose province might wonder why a guy from Toronto effectively now controls the Heritage Fund, the provincial slush fund created in 1976 with oil and gas royalties. “With the competition between Calgary and Edmonton, I guess they wanted someone who was neutral,” says Baillie, with a smile. He quickly points out that George Gosbee, the dynamic CEO of Calgary-based energy adviser Tristone Capital, was appointed at the same time and that they selected the rest of the board together (each held a veto). “Uppermost in our minds was that we wanted Alberta to feel comfortable. That their money was in good hands. This is a functional board,” says Baillie.