The Investment Management Corporation of Ontario (ICMO) in Toronto has committed to a new strategic partner, Ares Management Corp., with a $500 million commitment within its global credit asset class.
The investment is split between $400 million in a fund of one structure and another $100 million to the Ares Pathfinder fund for opportunistic exposure to the C$73 billion ($61 billion) fund’s growing alternative credit portfolio. Ares is a new relationship for IMCO.
iMCO’s global credit portfolio became a distinct asset class in 2020 and invests across a range of public and private credit market segments including corporate, real estate, infrastructure, emerging markets, structured and IP royalties to generate higher risk-adjusted returns than traditional fixed-income and additional diversification benefits.
As of yearend 2020, the program total C$4.6 billion and is expected to grow to $8 billion or more by 2025.
“Ares 20-plus year track record, depth and breadth of capabilities and expertise across asset classes represents the kind of strategic partner we want as we grow our global credit portfolio,” said Jennifer Hartviksen, managing director, global credit, IMCO. “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.”
The Ares Pathfinder Fund closed in March with a total of $3.7 billion, boosting Ares overall alternative credit strategy that spans 25 funds, 40 investment professionals and $13 billion in AUM. According to IMCO, Pathfinder pursues a differentiated strategy of providing tailored financial solutions for owners of large, diversified portfolios of assets that generate predictable and contractual cash flows throughout market cycles.
Pathfinder invests in alternative credit assets that are often sourced in the financing gaps found between the credit, private equity and real estate sectors.
“We are very excited to partner with IMCO and leverage our credit market leadership position to manage this strategic mandate,” said Chief Executive Officer and President of Ares Michael Arougheti. “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.”
According to IMCO’s Hartviksen, the new Ares mandate allows for the public-sector focused fund to respond quickly to the demand for the more bespoke capital solutions. The need for these solutions is driven by the current market as the pandemic has exposed financing gaps in public credit segments for hard hit sectors that need to address long-term solvency challenges, she added.