Investment Performance
Investment Leadership Q&A
Our team has built portfolios that are proving resilient as we move through various business and market cycles, positioning our clients well for the future.”
Justin
AIMCo delivered strong results for our clients during 2024 with a Balanced Fund net investment return of 12.6%, or $15.1 billion. It was an exceptional year for returns from public markets, with global stock markets producing robust returns. AIMCo’s Public Equities portfolio earned a 24.7% return. Fixed Income returns were positive in a volatile rate environment, and our high-quality credit exposure contributed positively to our clients’ portfolios.
Peter
We were pleased with the double-digit performance of our Infrastructure and Private Equity portfolios, with returns of 12.0% and 11.8%, respectively. Infrastructure had some assets that performed exceptionally well over the year which were rewarded with significant increases in valuation. The Private Debt & Loan and Mortgages portfolios also continued to perform strongly with above-benchmark returns.
Justin
Uncertainty was a common theme through the year, with investors concerned about market concentration and increasing valuation risk. Geopolitical risks were present, including conflicts in the Middle East and Europe, and several significant elections around the world. Monetary policy rates began to diverge across borders, adding in additional complexity. Despite this background, economic and earning data was unexpectedly resilient, with many markets delivering double-digit returns for the year. Our Canadian Equity and Emerging Market Equity pools lagged their benchmarks, but delivered strong absolute returns.
Peter
The challenges faced by the real estate sector are well documented in headlines, particularly for office properties. Despite a negative return in 2024, AIMCo’s Real Estate portfolio had some promising performance from assets such as data centres, industrial properties and retail.
Justin
The Balanced Fund’s 4-year and 10-year annualized returns came in at 7.8% and 7.4%, respectively. Both measures were above their benchmarks, indicating that AIMCo’s active investment strategies continue to add value for clients.
Peter
The long-term performance of our private asset portfolios is worth noting. Private Equity, Private Debt & Loan, Infrastructure and Renewable Resources had 4-year annualized returns with outperformance ranging from 3.0% to 7.7%. Our team has built portfolios that are proving resilient as we move through various business and market cycles, positioning our clients well for the future.
Justin
Anything and everything. Since the results of November’s U.S. presidential election came in, the amount of information coming at us has been unprecedented. The tariff situation has been changing daily, if not hourly. The team has been adept at assessing the impact of multiple scenarios on the portfolio while seeking opportunities to add value for clients. Managing risk is of the utmost importance.
Peter
Certainly, the current political and macroeconomic conditions are top of mind. In addition, within our private investments there is a continued focus on value creation and asset management activities to unlock value within portfolio companies. Broadly, we are seeing a balanced portfolio behave as it should with the complementary nature of AIMCo’s asset classes providing a level of stability in the current environment.
2024 balanced fund INvestment performance
The AIMCo Total fund reflects the aggregate of all client accounts, including clients who exclusively choose fixed income and money market investments to achieve their objectives.
Asset Class Performance
Total AIMCo Fund Aggregate (1)
$175,609
12.3
9.6
5.1
7.4
6.4
12.3
6.9
(3.4)
14.7
2.5
Benchmark
13.8
11.2
5.4
6.1
6.4
13.8
8.7
(5.3)
8.0
8.0
Balanced Fund Aggregate
$135,427
12.6
10.3
5.1
7.8
6.7
12.6
8.0
(4.6)
16.2
2.6
Benchmark
13.4
11.4
5.2
6.1
6.7
13.4
9.3
(6.1)
8.9
8.9
Money Market and Fixed Income (2)
$49,977
4.6
6.1
1.2
0.6
2.0
4.6
7.7
(8.1)
(1.1)
7.8
Benchmark
4.2
5.9
0.6
(0.1)
1.3
4.2
7.6
(9.2)
(2.2)
7.3
Money Market & Fixed Income-Public
$35,811
3.2
5.5
(0.1)
-
-
3.2
7.9
(10.5)
-
-
Benchmark
3.1
5.0
(0.5)
-
-
3.1
7.0
(10.8)
-
-
Money Market (3)
$2,643
4.8
4.8
3.8
2.9
2.5
4.8
4.9
1.7
0.2
1.2
Benchmark
4.7
4.7
3.7
2.8
2.4
4.7
4.8
1.7
0.2
0.9
Universe Bonds
$17,385
4.6
6.2
(0.2)
(0.7)
1.3
4.6
7.8
(11.8)
(2.3)
9.9
Benchmark
4.2
5.5
(0.6)
(1.1)
0.8
4.2
6.7
(11.7)
(2.5)
8.7
Fixed Income Long-Term
$14,234
0.1
4.8
(5.4)
(5.3)
(1.9)
0.1
9.7
(23.0)
(4.8)
13.0
Benchmark
0.2
4.4
(5.5)
(5.4)
(2.2)
0.2
8.8
(22.6)
(5.1)
12.1
Real Return Bonds
$1,141
3.9
3.1
(3.0)
(1.9)
1.1
3.9
2.4
(14.2)
1.7
13.7
Benchmark
3.7
2.9
(3.2)
(2.0)
0.9
3.7
2.0
(14.3)
1.8
13.0
Segregated Assets - Long Term
$409
4.9
5.3
1.7
1.0
1.9
4.9
5.7
(5.1)
(1.2)
5.6
Benchmark
4.5
4.8
1.5
0.8
1.6
4.5
5.0
(4.8)
(1.2)
5.1
Mortgages
$6,102
6.4
5.4
1.8
1.7
3.2
6.4
4.5
(5.0)
1.2
9.4
Benchmark
5.8
5.9
1.7
1.0
2.5
5.8
6.0
(6.1)
(1.1)
8.7
Private Debt and Loan
$8,064
8.7
9.1
8.1
8.2
7.8
8.7
9.6
6.2
8.5
5.9
Benchmark
8.0
9.9
6.5
4.6
4.7
8.0
11.8
(0.1)
(0.9)
5.3
Public Equities & Absolute Return (2)
$61,784
24.7
20.2
9.2
12.5
10.7
24.7
15.8
(10.0)
23.4
3.7
Benchmark
24.6
20.1
8.8
11.1
11.3
24.6
15.9
(10.6)
18.1
12.2
Public Equities
$58,505
25.7
20.8
9.5
12.8
10.9
25.7
16.1
(10.0)
23.4
3.7
Benchmark
25.5
20.7
9.2
11.4
11.5
25.5
16.1
(10.6)
18.1
12.2
Canadian Equity
$10,500
19.8
15.7
8.3
13.5
9.9
19.8
11.7
(5.1)
30.5
(3.4)
Benchmark
21.7
16.6
8.6
12.5
11.1
21.7
11.8
(5.8)
25.1
5.6
Global Equity
$37,439
30.6
25.4
11.7
15.2
13.2
30.6
20.5
(11.4)
26.2
5.6
Benchmark
29.4
24.9
11.0
13.4
13.5
29.4
20.5
(12.2)
20.8
13.9
Emerging Market Equity
$8,262
15.8
11.7
2.1
1.8
2.8
15.8
7.7
(14.7)
1.0
7.0
Benchmark
17.3
11.9
2.4
0.9
3.8
17.3
6.9
(14.3)
(3.4)
16.2
Global Small Cap Equity
$2,304
19.2
16.0
7.5
11.1
9.8
19.2
12.9
(7.8)
22.8
4.8
Benchmark
18.0
15.3
5.0
7.4
8.7
18.0
12.7
(12.9)
14.8
13.9
Absolute Return (4)
$3,279
8.6
6.4
-
-
-
8.6
4.2
-
-
-
Benchmark
7.4
5.8
-
-
-
7.4
4.2
-
-
-
Private Equities (5)
$14,731
11.8
9.2
6.2
19.2
16.7
11.8
6.7
0.5
68.5
7.2
Benchmark
23.9
16.8
12.4
11.5
10.8
23.9
10.1
4.2
8.8
8.1
Real Estate
$22,055
(2.0)
(5.3)
(2.1)
1.8
(1.5)
(2.0)
(8.4)
4.6
14.5
(13.6)
Benchmark
5.2
0.7
1.1
2.7
1.6
5.2
(3.6)
1.8
7.8
(2.6)
Infrastructure
$22,942
12.0
7.9
10.7
12.7
9.3
12.0
3.8
16.8
19.0
(3.5)
Benchmark
7.8
7.9
8.0
7.7
7.4
7.8
8.0
8.2
6.8
6.1
Renewable Resources
$3,747
1.9
1.8
9.2
10.6
7.1
1.9
1.6
25.7
15.0
(6.0)
Benchmark
8.0
8.0
7.9
7.6
7.3
8.0
8.0
7.7
6.8
6.1
AIMCo Strategic Opportunities Pool
$192
1.7
8.2
(2.7)
(2.7)
(2.6)
1.7
15.0
(21.3)
(2.9)
(2.0)
Benchmark
29.4
24.9
11.0
13.4
13.5
29.4
20.5
(12.2)
20.8
13.9
- Total AIMCo Fund calculations do not include $4.0 billion of assets that do not meet the required conditions for inclusion in AIMCo's excess returns as of December 31, 2024.
- Market Value does not include Tactical & Overlay Program notional exposures.
- Money Market market value does not include cash held by AIMCo investment pools except $7.98 million from two Private Equity pools that hold Venture Capital and Relationship Investing assets.
- Absolute Return inception date is June 1, 2023.
- Private Equities include Core Private Equities, Alberta Teachers’ Retirement Fund Private Equity, Relationship Investing and Venture Capital.
performance Benchmarks
Money Market and Fixed Income
Money Market
Universe Bonds
Long-Term Bonds
Mortgages
Real Return Bonds
Private Debt and Loan
Segregated Assets - Long Term
Equities
Absolute Return
Canadian Equities
Global Equities
Global Minimum Variance
Emerging Markets Equities
Global Small Cap Equities
Private Markets
Private Equity(1)
Private Equity, ATRF
Real Estate, Canadian
Real Estate, Foreign
Real Estate, ATRF
Infrastructure
Infrastructure, ATRF
Infrastructure, Energy Opportunities(2)
Renewable Resources
AIMCo Strategic Opportunities
Tactical Asset Allocation Overlays
1. Effective July 1, 2024. Prior to this date, the product benchmark was Total CPI 1 Month Lagged + 650 bps (5-year rolling average).
2. Energy Opportunities benchmark was added as of December 18, 2024.
Asset Class Overviews
Public Equities & Absolute Return
Purpose
The Public Equities platform is a diversified and liquid set of portfolios that provide Canadian, global developed, global small cap and emerging markets equities exposures, as well as an absolute return portfolio. The platform is designed to support clients’ investment needs by providing capital growth, liquidity, inflation protection and capital preservation. Clients allocate across a suite of products, which are invested in underlying strategies. Allocations to underlying strategies are optimized across several dimensions, including factors, sector, market capitalization, and regional exposures, tailored to the specific requirements of the products.
Results
2024 was an exceptional year for public equity markets. Entering the year, many market observers were concerned about a potential recession and ensuing market downturn. However, markets more broadly were energized by resilient economic and earnings data, propelling global markets to new highs. A powerful, almost frenzied narrative in 2024 was the promise of artificial intelligence, as investors focused on how to fund and power its innovative potential. As a result, equity returns were robust, with many markets delivering double-digit returns for the calendar year.
Despite this, some uncertainty lingered; mixed inflation data, divergent central bank policies, economic indicators, and geopolitical tensions created ever-present navigational challenges for public equity strategies and managers. As earnings in the information technology sector consistently exceeded those of other sectors throughout the year, market concentration remained pronounced as only a handful of mega-cap information technology and communications companies dominated equity returns. The U.S. market exhibited exceptional strength and resilience over the year, bolstered by persistent economic indicators, central bank rate cuts, and a decisive outcome from the federal election, although enthusiasm faded in December from the potential for trade tariffs. The potential for geopolitics to amplify market volatility was reinforced with sudden outlier events, which also created market dislocation opportunities for active investors.
The Global Equities Master Pool generated the highest annual return of 30.6%, with 1.2% of excess return. On a four-year annualized basis, the pool provided an annual return of 15.2%, with an excess return of 1.8%. The Canadian Equities Master Pool returned 19.8%, the Emerging Markets Master Pool generated a return of 15.8%, the Global Equity Small Cap Pool returned 19.2% and the Absolute Return Master Pool returned 8.6%. The Public Equities and Absolute Return products collectively outperformed their respective benchmarks by 0.1%. Global Developed Equities was the largest contributor to overall value add over the year, while Canadian Equities detracted the most.
Across AIMCo’s strategies, both Systematic and Alpha Strategies performed well. Notable contributions came from internal alpha strategies, external systematic managers (across geographies), and external portable alpha. In general, strategies with underweight allocations to information technology and communications struggled to keep pace with the mega-cap names that drove much of equity returns throughout the year.
Looking Ahead
Looking ahead, we anticipate more moderate benchmark returns for the upcoming year. However, we expect an increase in security return dispersion, driven by factors such as dissimilar central bank policies, volatile inflation, technology innovation, and trade negotiations, which should enhance the opportunity set. As market leadership evolves, Absolute Return, Systematic and Fundamental managers are expected to deliver. Moreover, the unpredictable nature of geopolitics is likely to challenge the performance of public equities portfolios while providing market dislocation opportunities.
Money Market & Fixed Income
Purpose
The Money Market & Fixed Income portfolios are designed to provide clients with capital preservation, liquidity, diversification, liability hedging, inflation protection and superior, risk-controlled returns relative to their respective benchmarks.
We actively manage and add value to the portfolios in four principal ways:
- Anticipating interest rates and positioning duration accordingly
- Anticipating the term structure of interest rates
- Active investment and positioning of credit exposures in various credit markets — public, structured finance, and private markets
- Active individual security selection across fixed income markets
The team manages portfolios with global investments seeking diversified return and manages risk through prudent duration, curve, sector, geographic, issuer, and structural selection.
Results
Money Market
The Money Market Pool provided an excess net return of 0.1% with favourable positioning in duration relative to its benchmark. Given the high yields at the start of the year, total returns were 4.8%. The Bank of Canada (BoC) began 2024 concerned about stalled growth in the Canadian economy that had begun in mid-2023 in response to the combination of higher inflation and interest rates. The BoC noted at that time that employment growth had slowed, but wage growth remained elevated. The Governing Council reduced the policy rate by 0.25% in June, reflecting higher confidence in their improved outlook on inflation, but emphasized that policy easing was likely to be gradual. Their view reflected some confidence that improvement on inflation would be gradual.
The pace of easing accelerated in the fourth quarter of 2024 with inflation falling below target, growth below potential, concerns around residential investment and new concerns related to population growth arising from immigration as federal policy evolved. In sum, the BoC eased 1.75% compared to the U.S. Federal Reserve’s 1.0% through 2024. The very different paths of the two central banks and the BoC’s evolving set of concerns highlighted in their Summary of Governing Council deliberations through the year contributed to the uncertainty at any given time around the likely path of rates, even if certainty prior to individual meeting dates was high.
Public Fixed Income
Total return for clients largely reflected where they were situated on the yield curve, with shorter maturity exposure earning a higher return in comparison to that of longer maturities.
Excess returns for the Universe Bond portfolio were modest for the year but still exhibited solid returns over a four-year horizon. The steepening of the yield curve was a net positive, as the sharp decline in shorter maturity yields more than offset the impact of the slight rise in longer maturity yields. Two-year Canadian sovereign yields fell from 4% to 3%, while 30-year yields edged up from 3% to 3.25%. By year-end, the yield curve had returned to a more normal, positive slope, setting the stage for modest returns in benign economic conditions. However, risks remain on both sides — a downturn could boost performance, while a more inflationary global backdrop could pose challenges to returns.
Long bonds underperformed shorter-maturity bonds due to the steepening of the yield curve throughout the year. Concerns over fiscal sustainability had the greatest impact in this sector, as investors looked beyond cyclical trends and focused on the prospect of prolonged heavy government bond issuance. Broader macroeconomic forces also played a role, with long-term trends toward deglobalization and reduced migration seen as contributing to a persistent inflationary bias in the global economy.
Real Return Bonds
Real Return Bonds modestly outperformed their nominal counterparts. Real yields and breakeven inflation remained rangebound throughout the year, ultimately reflecting the initial real yields plus actual inflation readings for the remainder of the year. Trading activity in outstanding Real Return Bonds remained light, as the Government of Canada’s decision to halt new issuance remained in effect.
Private Debt & Loan
Private Debt & Loan invests in a diversified portfolio of private credit as a higher yielding alternative to public fixed income. The investments are typically privately sourced and structured, floating rate loans that exhibit lower return volatility and correlation to other traditional asset classes.
In 2024, the portfolio generated a net return of 8.7%, outperforming the benchmark by 0.7%. Over the last four years, Private Debt & Loan returns have been persistently stable and resilient, delivering an annualized net return 8.2%. The performance was primarily driven by a diversified, relative value and credit-focused approach to portfolio construction.
Private Mortgages
The portfolio provides steady cash flow and premium return over government bonds, aligned with the long-term objectives of our clients. The Mortgages portfolio had a return of 6.4% during 2024, outperforming its benchmark by 0.6%. The strong absolute return and positive relative return was largely attributable to strong carry of the portfolio and tightening commercial mortgage spreads over the course of 2024. However, the positive impact was offset by curve movements and the market value write-down of one investment in the office sector.
Looking Ahead
Due to the high level of uncertainty at the beginning of 2025, the public Fixed Income portfolios were positioned lightly with lower-than-average active risk. Credit market positioning remains cautious, and duration positioning remains close to benchmark with large geopolitical uncertainty that could have significant impacts on the future path of inflation and global economic growth. This uncertainty will make anticipating the future path of monetary policy normalization to a long-term neutral rate more difficult. We believe cautious positioning will enable us to be nimble and react to the broader economic, inflationary and market dynamics.
The Private Debt & Loan team will continue building investment capabilities to service clients’ increased allocations to this growing asset class. This includes maintaining discipline in our credit selection and searching for relative value across the private credit market as technical and fundamental factors drive pricing, credit selection and deployment pacing.
The Mortgages group notes significant liquidity in the commercial real estate credit space; however, muted trading volumes are limiting the demand for new loans, putting downward pressure on credit spreads. Global macroeconomic uncertainty is expected to hinder trading volume which may lead to fewer opportunities. As domestic asset owners shift their borrowing strategy to a longer-term focus, the group anticipates leveraging our competitive advantages to add high-quality investments with potential for strong risk-adjusted returns to the portfolio.
Real Estate
Purpose
Real estate investments provide clients with exposure to domestic and international opportunities through direct holdings diversified across property types and geography.
The domestic portfolio consists primarily of direct investments with joint venture partners in high-quality industrial, retail, office, and multiunit residential properties in Canada’s major cities. The international program invests both indirectly and directly through joint ventures with local operating and investment partners in the U.K., Europe, U.S., and Asia Pacific. AIMCo participates in niche market sectors through strategic programmatic partnerships and externally managed opportunity funds.
Results
In 2024, AIMCo’s domestic real estate portfolio generated a positive return of 0.2% and ended the year with a net asset value of $13.1 billion. With an improving capital market environment, liquidity challenges eased versus the prior year. Appraised values continued to stabilize, driven by easing interest rates and ongoing resilient operating fundamentals. Most of the domestic portfolio is comprised of core, income-producing properties held through strategic joint venture partnerships. To a lesser extent, the portfolio includes non-core strategies, such as “build-to-core” that includes new construction and renovation value-add projects, which carry varying levels of higher risk and return. The domestic portfolio return was driven by strong retail, residential, and data centre investments, balanced with ongoing difficult conditions in the office sector.
The foreign portfolio generated a return of -4.5% and ended the year with a net asset value of $7.3 billion. The foreign program employs a predominantly non-core approach of opportunistic and value-add strategies. These include development projects and value-add projects that require major renovations and leasing to enhance value. The foreign portfolio return was adversely impacted by the office sector in the United States and the general development exposure in the portfolio, offset somewhat by stronger industrial performance in Europe. As development projects begin to reach completion, this impact should lessen, and stabilized asset values should drive stronger outperformance versus core holdings. Currency volatility also impacted the CAD returns reported.
Overall, AIMCo’s Real Estate portfolio generated a return of -2.0% for the year, compared to its benchmark of 5.2%. Over 10 years, Canadian Real Estate achieved a rate of return of 3.6%, compared to a benchmark return of 3.9% and Foreign Real Estate achieved a rate of return of 3.6% compared to a benchmark return of 4.9%.
Looking Ahead
In 2024, the Real Estate team continued executing on a five-year strategic plan to trade into accretive strategic investments. The team continues to move the portfolio to high conviction secular themes such as healthcare, technology, demographics, and housing.
The Real Estate team continues to reposition the domestic and foreign portfolios toward sectors that are experiencing secular and demographic tailwinds. These include traditional sectors such as industrial, multi-family residential, and grocery-anchored retail centers, along with growing niche sectors like data centres, life science research office buildings, and alternative housing such as single family build-to-rent homes. This repositioning is ongoing and designed to drive toward a more resilient real estate portfolio, built to weather market volatility and remain focused on long-term performance.
As we move further into 2025, investor sentiment in real estate remains cautiously optimistic. The global capital market recession for real estate experienced over the past several years has started to ease as interest rates have fallen in most markets. Debt availability is a key input for real estate equity investments and debt markets should continue to normalize, supported by ongoing robust operating fundamentals. Our real estate portfolio has been resilient from an operating perspective, suffering more acutely from capital market repricing. We have broadly observed more investors returning from the sidelines and capital activity picking up.
Infrastructure
Purpose
AIMCo Infrastructure investments are made in real assets that typically provide an essential service which, over the long term, are expected to generate stable, inflation-linked cashflows for our clients. The portfolio consists primarily of diversified long-term, equity-oriented positions in assets with high barriers to entry, regulated returns or long-term contracted revenues such as utilities, energy infrastructure and transportation.
Results
In 2024, the Infrastructure portfolio return was 12.0%, outperforming the benchmark by 4.2%. On a longer-term basis, the Infrastructure portfolio continues to generate strong absolute and excess returns, demonstrating the portfolio’s ability to deliver solid financial and operating results through market cycles. This performance is reflective of the high-quality assets across targeted sectors and geographies that make up the portfolio.
The majority of the infrastructure investments in the portfolio contributed positively to the overall asset class performance in 2024, including notable returns from some of the largest investments such as AirTrunk, Cando Rail and Terminals and Howard Energy Partners.
Given the portfolio remains largely fully invested, the Infrastructure team continued to focus on successfully executing asset management initiatives to unlock value in 2024. As an example, the Infrastructure team worked closely with our partners to complete an inaugural bond issuance of more than $7 billion by Coastal GasLink. This transaction marked the largest corporate bond offering in Canadian history and significantly reduced refinancing risk.
The Infrastructure team continued to screen numerous opportunities from our pipeline and transacted on several new investments in 2024. These included investments in Cyan Renewables (Asian Offshore Service Vessels), and IndiGrid (Indian Renewables).
Looking Ahead
We continue to see investments in real assets, including infrastructure, as a key building block to portfolio allocations, providing potentially attractive returns and diversification benefits. As a result, we expect the demand for inflation-sensitive assets such as infrastructure to remain relatively robust through 2025 and beyond.
Despite the expected increase in near-to-medium term global economic uncertainty and the associated consequences of potentially higher inflation and longer-term interest rates, private investment in infrastructure is expected to remain elevated on a longer-term basis, benefitting from a continuation in key trend drivers such as deglobalization and digitalization. We have observed an acceleration of many government policies and corporate objectives supporting further investment into infrastructure areas that support the reshoring of supply chains and the adoption of AI and digitalization across the economy. In part because of these trends, we anticipate increased global demand for energy, which is likely to benefit midstream and other related infrastructure sectors.
We believe that AIMCo’s Infrastructure portfolio remains well positioned. Our governance rights at many of the portfolio’s largest investments and our focus on active asset management affords the Infrastructure team the ability to be patient and look through market volatility and allows us to act in the best interest of clients and to seek maximum risk-adjusted returns over the long run.
Private Equity
Purpose
AIMCo’s Private Equity portfolio is comprised of two primary strategies — Private Equity Fund Investments and Directs & Co-Investments. The team selectively invests with the world’s leading private equity firms and builds deep, lasting relationships with partners. Investments are made globally across a broad range of sectors including Business Services, Consumer, Financial Services, Healthcare, Industrials, and Information Technology.
Results
The $11.8 billion Core Private Equity* portfolio generated a return of 12.9% in 2024, underperforming the benchmark by 4.9%. Benchmark performance was robust as public markets surged in the latter half of 2024, leading to lower relative performance of the portfolio; however, the positive total return of the program reflects the benefits of a globally diversified program that is underpinned by top performing and proven fund managers, complemented by high-quality co-investment opportunities alongside these partners.
On a longer-term basis the asset class continues to generate consistent excess return, delivering a 19.0% 4-year annualized net return, outperforming the benchmark by 7.5%. The performance over this period benefited from a highly selective allocation to co-investments that delivered superior returns, and continued positive performance from fund commitments to well-established large and middle-market buyout funds in North America, Europe and Asia.
Looking Ahead
Global private equity investment exhibited signs of improvement over the course of 2024, as declining inflation and interest rates helped to support economic growth and thus confidence amongst managers. The private equity fundraising environment remained constrained, however, as distributions were below historical averages despite the modest increase in transaction activity.
Entering 2025, pressure remains on managers to deliver liquidity to Limited Partners (LPs), which will be a prerequisite to a recovery in the fundraising environment. Managers are expected to be creative in this endeavour, leveraging alternatives to full sales of their businesses including recapitalizations, minority sales, and secondary market solutions including Continuation Vehicles.
Market volatility and uncertainty is expected to be a theme through 2025, and managers will need to be nimble to navigate a challenging business environment for their portfolio companies, while also seeking to continue to deploy capital and satisfy LP desires for liquidity, performance, and co-investment.
*All return information is exclusive of ATRF’s segregated account; as well as Relationship Investing and Venture Capital as those are deemed non-core. Information inclusive of that performance is available in the Asset Class Performance Table.
Renewable Resources
Purpose
AIMCo’s Renewable Resources program comprises a global portfolio of land-centric, high-quality timberland and agricultural assets that are characterized by their low correlation to traditional asset classes, inflation-hedging qualities, and a strong match with client time horizons. Renewable resources assets serve to provide capital preservation, current yield, and real asset appreciation. The Renewable Resources program is concentrated in developed market countries with an opportunistic view on emerging market exposure. Flexibility is ingrained into the Renewable Resources mandate, which allows the team to maximize long-term value by optimizing portfolio assets between timberland, agriculture, and strategic investments along the value chain.
Results
The Renewable Resources portfolio achieved a positive absolute return of 1.9% in 2024, falling short of the portfolio benchmark return. Though each sector and region faces a unique operating environment, renewable resources assets globally faced generally challenging conditions driven by high interest rates, weak commodity markets, and persistently high input costs. As an example, Forestry Investment Trust, the largest timberland investment in the Renewable Resources portfolio, faced weak customer demand from pulp customers in Asia and production and operational cost increases that weighed on the business’s income yield and appraised value. Though the difficult conditions put a strain on the operating returns of most enterprises, the impact on appraised values were less consistent as a clear “flight to quality” was observed where the value gap between the highest quality, most productive assets and those of lesser quality has continued to widen. The Lawson Grains business, one of Australia’s largest corporate farming enterprises, was a clear beneficiary of this trend in 2024.
Despite a modest result in 2024, the long-term performance of the Renewable Resources program remains strong, with the 4-year return exceeding the portfolio benchmark by 3%. This is consistent with the typical pattern exhibited by renewable resources assets where appraised values tend to change in large step-changes followed by several periods of subdued or flat value changes. The long-term outlook for the asset class remains strong as investor interest in natural capital continues to grow and alternative revenue streams associated with large-scale land ownership continue to increase.
Looking Ahead
The Renewable Resources team is focused on pursuing investment opportunities which will increase the crop-type and geographic diversification of the portfolio. The team is also collaborating closely with its investment partners and portfolio company management teams to maximize the long-term value of existing assets through the implementation of highest and best use initiatives and strategic investments which will increase productivity and overall portfolio resilience.