Matthew Sellers of Mergers and Acquisitions reports Quebec's pension giant exits USI as Aon strikes US$17 billion deal:

Aon has agreed to buy USI Insurance Services from KKR and other shareholders for US$17.0 billion (C$23.6 billion), pushing the broking and consulting giant deeper into the US middle-market territory it first staked out with its purchase of NFP two years ago.

USI has no meaningful Canadian footprint. Aon does: it has operated here since acquiring Toronto brokerage Reed Stenhouse in 1997, and today runs Aon Reed Stenhouse Inc. out of Toronto, with roughly 1,600 staff across offices in eight provinces and a retirement practice advising on more than C$77bn in Canadian plan assets. USI's business will sit almost entirely outside that structure once the deal closes, since it's a purely American operation.

The more direct Canadian connection is on the seller's side. In March 2017, Caisse de dépôt et placement du Québec - the Quebec pension fund known as CDPQ, or La Caisse - teamed up with KKR to buy USI from Onex Corporation for US$4.3bn (C$6.0bn), each taking an equal stake in the Valhalla, New York-based brokerage.

CDPQ helped fund USI's acquisitions and technology spending as the firm roughly doubled in size over the following six years. In 2023, KKR bought back more than half of CDPQ's position for over US$1bn (C$1.4bn) to become USI's largest shareholder; CDPQ's Martin Longchamps described KKR at the time as "a tremendous strategic partner in this investment journey." Monday's announcement names KKR and unspecified "other shareholders" as sellers without mentioning CDPQ directly, so it isn't clear what stake, if any, the fund still held going into this deal.

Either way, the transaction marks the end of an ownership chapter that started with one of Canada's largest institutional investors.

The numbers

KKR has said the sale delivers roughly six times its return on the 2017 investment and 3.4 times its return on capital across the full life of the position. On a net basis, after accounting for roughly US$278m (C$386m) in tax attributes, Aon's purchase price works out to US$16.7bn (C$23.2bn) - about 14.5 times USI's synergised trailing-12-month adjusted EBITDA.

USI is the tenth-largest insurance broker in the US, generating around US$3bn (C$4.2bn) in annual revenue through more than 10,500 employees across nearly 200 US offices. It sells property and casualty coverage, employee benefits, personal risk products and retirement plan advice, largely to businesses too small for the largest brokers but too complex for a local agency.

Under the deal, USI chairman and chief executive Mike Sicard will become president of Aon plc and global chief executive of its middle-market business, reporting directly to Aon chief executive Greg Case and taking a seat on the firm's executive committee. Case said the deal would make Aon "the premier US middle-market platform," and pointed to what he calls the firm's data and analytics edge over rivals. He was more direct in an interview with the Wall Street Journal: "We see this having a financial impact almost immediately."

Aon expects the combination to generate about US$395m (C$549m) a year in run-rate synergies once fully integrated, and expects it to add to adjusted earnings per share from 2028. The firm plans to fund the entire purchase with new debt and says it intends to hold its current credit ratings - Baa2 at Moody's, A- at S&P - by pausing share buybacks while that debt gets paid down. BofA Securities and Citi advised Aon; KKR worked with Goldman Sachs, Insurance Advisory Partners and Morgan Stanley. The deal is expected to close in the fourth quarter of 2026, subject to regulatory approval.

A second middle-market deal in two years

The move follows the same script as Aon's purchase of NFP, the middle-market broker it bought from Madison Dearborn Partners and HPS Investment Partners for a deal valued at roughly US$13.4bn (C$18.6bn) when it was announced in December 2023. That deal changed Aon's position among the world's largest brokers, and Aon has kept adjusting the pieces since, including selling most of NFP's wealth management arm back to Madison Dearborn last year for roughly US$2.7bn (C$3.8bn).

What Aon kept from NFP says something about what it wants from USI too: the corporate risk, employee benefits and institutional retirement business that sits at the centre of a middle-market client's balance sheet, rather than managing individual investors' wealth. Once the USI deal closes, Sicard will be responsible for combining its operations with NFP and Aon's existing middle-market unit.

What this means for competing brokers

The deal reshuffles a hierarchy that hasn't moved much at the top in years. Aon currently ranks second among US brokers with US$16.99bn (C$23.6bn) in 2025 brokerage revenue, behind Marsh McLennan's US$26.66bn (C$37.1bn), according to brokerage rankings; USI, at US$2.89bn (C$4.0bn) in 2025 revenue and nearly 11,000 staff, ranked tenth. Adding USI's revenue to Aon's puts more distance between it and Arthur J. Gallagher in third - a broker that has been closing ground of its own, having completed its US$13.45bn (C$18.7bn) purchase of AssuredPartners in August 2025.

Public brokers using their stock to buy scale, rather than growing it themselves, has been the story of the US sector for two years: Marsh McLennan bought McGriff Insurance Services, Brown & Brown paid US$9.83bn (C$13.7bn) for Accession Risk Management, and now Aon and Gallagher have each done a second mega-deal.

Canada's brokerage market has been consolidating too, though along different lines. Navacord and Acera Insurance completed a merger in February, creating the country's largest privately held brokerage with roughly C$7.2bn in combined insurance and employee-benefits premium. The mechanics are different - no public buyer, no stock currency, just two employee-owned firms deciding to merge - but the underlying pressure to get bigger looks familiar.

Aon reported adjusted second-quarter earnings of US$3.81 (C$5.30) per share on July 29, ahead of analyst estimates, and its stock had a market value of roughly US$75bn (C$104.3bn) as of the Friday before the deal was announced. The announcement also comes weeks after Aon's chief financial officer, Edmund Reese, stepped down; the company said he'll serve as a senior adviser to Case through August 2027. 

Before I give you my thoughts, let's go back to 2017 when Financier Worldwide reported that KKR and CDPQ bought USI Insurance Services for US$4.3billion:

Private equity (PE) firm KKR and Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) have announced their intention to jointly acquire USI Insurance Services (USI) from Onex Corporation and its affiliates in a transaction which values the insurance brokerage at $4.3bn.

As partners with equal ownership, KKR and CDPQ – both of which have a strong track record in the financial services and insurance-related sectors and have been longstanding partners in multiple investments over the years – are looking to pursue attractive investment opportunities in high quality businesses with a longer duration and a lower risk profile in order to support strong management teams and facilitate long-term strategic business building.

With more than 4400 professionals operating out of 140 local offices throughout the US, USI delivers property and casualty, employee benefits, personal risk and retirement solutions. USI has become an industry leader by attracting best-in-class industry talent with a long history of deep and continuing investment in local communities.

The investment to acquire USI, which has over $1bn in revenues and operates out of 140 local offices serving every state, will primarily be made through KKR and CDPQ’s core private equity partnership, which includes funds from KKR’s balance sheet and from CDPQ’s pool of capital.

“USI is a fantastic company and is uniquely positioned to help address the risk management, insurance and employee benefits-related needs of small and medium-sized business owners,” said Tagar Olson, head of KKR’s financial services investing practice. “We look forward to working with CDPQ in helping management achieve its long-term vision to grow the business through accelerated investments in USI’s people, technology and solutions.”

A leading global investment firm that manages investments across multiple asset classes including PE, energy, infrastructure, real estate, credit and hedge funds, KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. Moreover, KKR invests its own capital alongside its partners’ capital and brings opportunities to others through its capital markets business.

Mr Olson continued: “Our successful experience in the insurance and benefits brokerage industry, coupled with the impressive track record of the USI management team, give us confidence in our ability to generate compelling returns while growing the business over the long-term.”

KKR’s co-investor, CDPQ, is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As one of Canada’s leading institutional fund managers (with over $30bn of assets under management), CDPQ invests globally in major financial markets, PE, infrastructure and real estate. Additionally, CDPQ’s private equity team has significant expertise both as a direct investor in companies and as a partner in investment funds.

“CDPQ and KKR are co-leading this investment and leveraging their respective expertise in the sector to support USI’s world-class management as it pursues its strategic plan for long-term growth,” said Christian Puscasiu, co-head of PE direct investing at CDPQ. “Our partnership was established to implement both firms’ patient, disciplined and collaborative investment approach. USI operates in a resilient sector characterized by stable, long-term returns and serves small and medium-sized businesses, which are the cornerstone of the US economy.”

The acquisition of USI by KKR and CDPQ is anticipated to close by the end of the second quarter of 2017 and is subject to customary conditions, including regulatory approvals.

“We are passionately committed to continuing and accelerating USI’s growth and investment as a leader in our industry,” said Michael J. Sicard, chairman and chief executive of USI. “We are excited to work with our new partners at KKR and CDPQ, and want to thank our partners at Onex for the tremendous support they provided to USI.” 

Now, my quick thoughts on this deal. The first article above states KKR said the sale of  USI Insurance Services to Aon for US$17 billion delivers roughly six times its return on the 2017 investment and 3.4 times its return on capital across the full life of the position.

In 2023, KKR bought back more than half of CDPQ's position for over US$1bn (C$1.4bn) to become USI's largest shareholder. At the time, La Caisse's Head of Private Equity, Martin Longchamps, described KKR as "a tremendous strategic partner in this investment journey."   

KKR delivered outstanding results on USI Insurance Services and the man who originated that deal back in 2017 was Tagar Olson (featured at the top of this post):  

Tagar Olson serves as a non-executive board member representing Integrum, Stout’s investment partner.

Tagar is a Founder of Integrum and Chairman of the firm’s Investment Committee.

Tagar has over twenty years of investment and acquisition experience, most recently during an 18-year career at KKR, where he was involved in numerous transactions valued at more than $50 billion in the aggregate.

Tagar joined KKR in 2002 and led the firm’s Financial Services industry vertical. At KKR, he participated as a member of the firm’s Investment Committee and Portfolio Management Committee within its Americas Private Equity business. He also served as a member of KKR’s Inclusion & Diversity Committee and its Investments, Markets and Distribution Committee, which was KKR’s most senior governance body.

During his time leading KKR’s Financial Services practice, KKR was one of the most active private equity acquirers of financial services and business services companies. Tagar was involved in KKR investments including Alliant Insurance Services, First Data (now Fiserv), Focus Financial, Mr. Cooper Group, Nephila, PURE, Resolution, Santander Consumer USA, Sedgwick and USI Insurance Services. Tagar also led KKR’s Hospitality & Leisure sector, where he was involved with KKR’s investments in Apple Leisure Group, KSL Recreation, Hotel del Coronado and La Costa Resort & Spa.

Prior to joining KKR, Tagar was with Evercore Partners, where he was involved in a number of private equity transactions and mergers and acquisitions.

Tagar currently sits on the boards of USI Insurance Services, Evertree Insurance, Mr. Cooper Group, Program Productions, and Strategic Risk Solutions. He is co-founder of the DHPS Foundation, a charitable organization dedicated to the research and treatment of rare genetic diseases. He holds a B.S. and B.A.S., summa cum laude, from the University of Pennsylvania. 

This is why La Caisse co-invested a large sum with KKR to acquire USI Insurance Services back in 2017, Tagar Olson brought a great investment to the table.

Had La Caisse kept its original position till now, it would have made even more money, but for portfolio reasons, they divested partially out of USI in 2023 and kept a little less than half their original position.

Still, a great investment in the burgeoning US insurance industry and now Aon will expand its operations with this strategic acquisition.

Again, this is why you want to invest alongside the best private equity funds: you gain scale, competence and fantastic long-term performance. 

Below, in this video, World trends breaks down the deal, including KKR’s approximately 6X return, Aon’s projected $395 million in synergies, the integration of more than 10,000 employees, potential regulatory scrutiny, and the expected earnings timeline through 2028.

Also, Bloomberg Intelligence reports KKR just scored $3.3 billion windfall on the sale of USI.

Lastly, TechStock reports Aon is nearing a $17 billion acquisition of USI Insurance—valuing USI at 5.7 times its annual revenue. This is nearly 23% of Aon’s total equity value. 

Why does it matter now? Analysts project Aon’s EPS to surge in the coming years, with an average price target 14% above current levels. But risks loom: debt funding, integration costs, and regulatory hurdles could impact earnings. Will this bold move accelerate Aon’s growth or mark an expensive gamble? Watch to get the edge before Monday’s market reaction.

Sean Conlon, Lee Ying Shan, and Alex Harring of CNBC report the S&P 500 falls Friday after Fed’s Warsh highlights inflation worries, but index posts positive week:

The S&P 500 fell on Friday, but still notched a winning week, after Federal Reserve Chairman Kevin Warsh conveyed some worry over current inflation trends.

The broad market index lost 0.25% and closed at 7,711.76, while the Nasdaq Composite slid 0.52% to 26,402.42, weighed down by losses in semiconductor stocks such as Nvidia and Intel. The Dow Jones Industrial Average was down 9.45 points, or 0.02%, and ended at 53,559.99.

The S&P 500 advanced 0.5% on the week, while the Nasdaq gained 0.9%. The Dow climbed 0.5% in the period for its first winning week in three.

In his remarks at the central bank’s annual symposium in Jackson Hole, Wyoming, Warsh said, “While this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved.”

He also said, “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job ... our mandate ... and our charge to keep.”

Bets among fed funds futures traders that the Fed will raise interest rates in September increased to 57.5% on Friday, per CME Group’s FedWatch tool. That’s up from 35.4% just a day ago.

Treasury yields on the short end of the curve were higher immediately after Friday’s speech, while those on the long end — which are linked to borrowing costs throughout the economy and have been a source of concern for markets recently — were roughly flat. By the end of the trading day, however, those on the short end had come off their lows.

“I found this speech in particular to be a very strong kind of message, both a message to the market but also just a kind of message in general that the way the Fed has done business for maybe the last 40 years in some ways has not been as rigorous as it could be,” said Bill Birmingham, managing director at REX Financial.

Birmingham added that Warsh’s comments about the composition of CPI in particular signal “that he is very much looking for consensus internally to raise rates,” he added.

Investors also digested more earnings results. Gap shares jumped about 13% despite a mixed quarterly report as the retail announced a new chief executive for the struggling Old Navy brand. Marvell Technology slid more than 10% after issuing current-quarter guidance for non-GAAP gross margin that disappointed the Street. 

Jennifer Schonberger of Yahoo Finance also reports Warsh offered forward guidance after all, former Fed vice chair says:

Markets knew they weren't going to get an answer to what the Federal Reserve would do next — so-called forward guidance — when the central bank's chairman, Kevin Warsh, spoke on Friday morning. The biggest question looming over Warsh's highly anticipated speech was whether he would clarify how the Fed will respond to rising inflation.

On that, he delivered, former Fed vice chairman Alan Blinder, now a professor of economics at Princeton University, said in an interview with Yahoo Finance.

Warsh painted a robust picture of the US economy, noting that economic growth appears to have strengthened, while characterizing the labor market as stable at full employment. He underscored that inflation remains too high and that while this summer's inflation readings were better than expected, they "do not tell me that underlying trends have meaningfully improved."

"I would call that forward guidance," Blinder said. "He doesn't call it forward guidance … That sounded to me like somebody who thought interest rates should go up, right?" 

Blinder thinks a September rate hike is on the table, saying Warsh sounded "like a man who was rationalizing raising interest rates."

"My guess is they'll be raising rates in September, just a quarter of a point, and [then] they'll wait," he said. 

Traders appear to agree. Odds of a September rate hike rose to nearly 60% following Warsh's speech, up from 35% on Thursday.

"Markets almost always want more clarity than policymakers can deliver," Blinder added. "There's a classic mismatch between the concreteness, I'll call it, that the markets are constantly craving. I think it's the case that Kevin Warsh wants to be a little less open than, say, [former Fed Chair] Jay Powell."

In his speech, Warsh laid out the data he's monitoring to set policy and reaffirmed that the Personal Consumption Expenditures index (PCE) is the Fed's preferred yardstick for inflation, after suggesting it may not be in July. 

He said he is watching changes in the growth rates of corporate earnings and capital spending, as well as the follow-on effects on asset prices, business confidence, consumer incomes, and spending.

Another former Fed official weighs in

Esther George, former president of the Kansas City Federal Reserve, said she thought Warsh delivered a very good speech.

"Although he stopped short of saying 'and here's what we'll do about it,'" she said of his economic assessment, "I think it sets it up in a way that is true to what he set out to do, which is 'I'm not going to over promise, but I'm going to tell you what we're concerned about.'" 

George applauded Warsh for parsing the numerous components of PCE to pinpoint how much higher certain subsectors were.

"I think that kind of analysis is important because when you're looking at trends, when you're trying to justify where you see the path, you really have to drill into it.

"So to me, his conclusion (was) that it's concerning, we know our job is price stability," she said.

More data incoming

Before their mid-September meeting, Fed officials will receive another Consumer Price Index reading, as well as data on wholesale prices, which can be used to reverse-engineer the calculation of their preferred PCE measure.

Blinder posited that Warsh thinks forward guidance means telling the public how much the Fed would raise rates in a certain time frame.

"That's not what I mean by forward guidance. It's not what a lot of people mean by forward guidance," he said. 

I titled this comment "Beyond Jackson Hole 2026 Edition" because I think traders are making way too much of a big deal on Fed Chair Kevin Warsh's remarks which he delivered earlier today.

Was it a decisively hawkish speech? It sure was, focusing on rising inflation, appeasing the hawks at the Fed who want the policy rate to rise.

But will it make a difference by mid-September, when the Fed meets to discuss policy and decide whether to raise the policy rate? Colour me skeptical, but unless you see a blowout number in the August payroll data, I strongly doubt the Fed will raise interest rates next month.

The Fed is way more preoccupied now with slowing labour markets than it is with inflation data.  

Also, Treasury Secretary Scott Bessent who meets every week with Kevin Warsh is fully engaged in yield curve control, with mixed results. Hard for me to see Warsh going against that trend. 

Importantly, I don't see the Fed going against the Treasury and raising rates right before US midterms. 

Even if Alan Blinder is right and the Fed raises by 25 basis points and stays put, it will not make a huge difference.

What I realize is that these Fed meetings are just used by traders to take profits and wait for another opportunity to go long risk assets. 

We are also running into September-October where mutual funds close their year, so expect volatility.

What else happened this week? King Kong, aka Nvidia, had another blowout quarter, significantly raising guidance for all of 2027.

The stock rallied sharply after it announced but didn't make a new 52-week high.

CrowdStrike (CRWD) stock surged on Thursday amid second-quarter earnings and revenue that topped consensus estimates while the cybersecurity firm's October quarter guidance came in above expectations. 

That sent all cybersecurity shares up.

Also, shares of Salesforce (CRM) jumped 22% Thursday after the company reported a beat on second-quarter earnings and announced an expanded partnership with artificial intelligence startup Anthropic. 

But it all came down to Jackson Hole today and that's what everyone focused on today.

Will the Fed finally raise rates in September? Give me a break! 

Here are the top-performing US large cap stocks this week (full list here): 

 And here are the worst-performing US large cap stocks this week (full list here):

Alright, let me wrap it up there. Enjoy your weekend, everyone, and don't fret about the Fed's next policy move; it's largely irrelevant.

Below, Federal Reserve Chairman Kevin Warsh said inflation isn’t meaningfully slowing and warned that policymakers must be confident that it is, otherwise the central bank has “work to do.” He reiterated that policymakers will return inflation to their 2% goal, which he said is a firm and fixed target. He spoke at the Fed’s annual economic symposium in Jackson Hole, Wyoming.

Second, Mohamed El-Erian, Allianz chief economic advisor, joins 'Closing Bell' to talk his takeaways from Fed Chairman Warsh's Jackson Hole speech.

Third, CNBC's Steve Liesman and Randall Krozner, Fmr. Federal Reserve governor, react to Fed Chairman Kevin Warsh's Friday speech at Jackson Hole.

Fourth, Dan Niles, Niles Investment Management founder, joins 'Squawk on the Street' to discuss Fed Chairman Warsh's Friday speech at Jackson Hole.

Lastly, Nvidia went up on good numbers, which Tom Lee points out it almost never does. That, in his read, is the healthy part of the story. Fundstrat's updated top stock ideas and the full framework behind this view were covered in the latest Fundstrat Direct webinar.

Barbara Shecter of the National Post reports AIMCo assets top $200 billion as public equities drive gains:

Alberta Investment Management Corp. surpassed $200 billion in assets under management with a 7.1 per cent net investment return in the first half of the year marked by conflict in the Middle East, U.S. trade policy uncertainty and evolving inflation expectations.

The provincial Crown corporation that invests on behalf of pensions, endowments and government funds had $210.7 billion in assets under management as of June 30.

Chief investment officer Justin Lord said the trade situation and other geopolitical and macroeconomic developments are front and centre for the globally invested fund, which has a strong presence in North America. About 40 per cent of AIMCo’s assets are invested in Canada.

“A prolonged dispute, whether it’s in the Middle East (or) whether it’s trade-related, certainly could create headwinds for the Canadian economy, for the equity market,” he said. “And that’s something we’re monitoring closely.”

Public equities were the strongest contributor to AIMCo’s performance in the first half of the year, benefiting from resilient corporate earnings and continued strength in AI-related sectors and global equity markets. The results were moderated, however, by private equity, where there was lower transaction activity and valuation pressure in software-related investments.

“Private equity, perhaps even more so today, is playing a vital role in diversification across our equity exposures,” Lord said.

“A number of of equity markets, be it global or emerging markets, are really reliant on a couple of very similar underlying themes with respect to where we’re seeing earnings growth and price appreciation contributing to that strong performance,” he added.

AIMCo’s private equity program is focused on fund and co-investment, and Lord said the team is seeing a number of opportunities that align with the fund’s strategy, as well as an increase in secondary deal flow.  

Public equities and absolute return strategies make up the bulk of AIMCo’s portfolio, at 38 per cent. The balance is split between private markets and money market and fixed income.

Lord said he plans to connect next month with “peers” and “partners” attending the Canada Investment Summit on Sept. 14 and 15, a conference convened by Prime Minister Carney that has a guest list of large global investment funds.

“We do have a significant amount of our assets invested here across a number of different asset classes and, should compelling opportunities arise, we’d be happy to … underwrite those transactions, much like we would in any other jurisdiction,” he said.

Lord said there are no hard targets or caps on AIMCo’s investments in Canada.

“We have a strong interest in seeing, obviously, a competitive and attractive investment environment here in our own backyard,” he said, “but we do invest globally on behalf of our clients and … ultimately, our responsibility is to deliver that long-term return for clients, and that means investing where we see the best opportunity to create value over time.”

Today, AIMCo issued a press release stating it has surpassed $200 billion in assets under management: 

AIMCo reached a significant milestone in the first half of 2026, surpassing $200 billion in assets under management while continuing to deliver strong long-term investment results for clients.

At the halfway mark of 2026, AIMCo’s Balanced Fund earned a 4-year annualized net investment return of 9.9% and a 10-year annualized net investment return of 7.8% for clients.

For the six-month period ending June 30, 2026, the Balanced Fund’s net investment return was 7.2%.

Chief Investment Officer Justin Lord shares more details on the results (watch below and here).

You can also read the brief report AIMCo put out at the bottom of the page under Justin's video here.

Below, I provide the details:

 

Some quick points. Overall, the results are solid and better than most of its peers, reflecting AIMCo's higher exposure to public markets.

Public Equities led the gains but there were positive contributions from Public Fixed Income, Private Mortgages, Private Debt and Loan, and Infrastructure.

Performance in private market portfolios, particularly Private Equity, moderated overall results amid lower transaction activity and valuation pressure in software-related investments.

Discussion With Justin Lord, AIMCo's CIO, On Mid-Year Results

Earlier today, I had a chance to catch up with AIMCo CIO Justin Lord to go over mid-year results. 

I want to begin by thanking him as well as Sabrina Bnaghoo and Alexandra Zabjek for setting up this Teams meeting, sending me material and assisting the meeting.

Keep in mind, I spoke with Justin in late March when I covered AIMCo's 2025 results here.

At the time, AIMCo's corporate annual report was not available, but it has since been released and is available here.

Justin began by giving me an overview of the results:

Yeah, certainly a couple of main points: Our mid-year updates tend to focus on the broader portfolio, the amalgamation of the client portfolios across the balanced fund. As you'll see, the net investment return was 7.2% for the first half of the year. That's $13.6 billion in net investment return across our client accounts.

Our four-year annualized number is 9.9%, reflecting that strong long-term performance that our clients depend upon and certainly positively impacting the 10-year annualized net return of 7.8%. As a long-term investor, we’re focused here with respect to fulfilling our mandate and meeting clients' needs. The other point to note, AIMCo did surpass $200 billion in assets other management as well, just reflecting that continued growth and collective scale of our clients across pension, insurance and government funds that are entrusted to us to manage.

But just owing to that scale that does position us to continue to access compelling investment opportunities that enhance that ability to deliver the long-term value on behalf of our clients and all Albertans. This is really key to our mandate, and I think we're demonstrating that we're achieving that successfully. One thing to note, our pension clients, for example, are currently fully funded, which should give all Albertans with a public pension plan a great deal of comfort regarding their financial futures.

And last but not least, the investment strategy that we put in place at the beginning of the year or at the end of 2025 has thus far proven to be moving in the right direction, with a focus on our core strategic capabilities, our competitive advantage from both structural and developed perspective, focusing on the strategic capabilities from a liquidity management portfolio construction perspective as it relates to our client portfolios overall.

Perhaps I'll leave it there, Leo, and we can jump into what you have with respect to asset classes, just noting that we'll keep some of the asset class level comments high-level. Again, we don't publish the underlying performance at mid-year and happy to go into much more detail once annual results are available, as we did last time.

I told Justin that I don't know what the (blended) actuarial hurdle rate is at AIMCo (6% or 6.3%?), but I said any time you're delivering above 7% on mid-year results, that is very strong and I especially noted the 9.9% annualized return over the last four years because that's excellent.

I asked him if they beat their benchmark in the first half and he replied:

I don't believe as a part of the mid-year results we focus on or provide those additional details, Leo. So I can't comment specifically given that at the total client portfolio level, we have a number of asset classes that will have various valuation schedules throughout the year. 

Perhaps what I can comment on is that across public markets, despite the continuing concentration that we're seeing in underlying performance in equity indices, both certainly, when looking at global and emerging market indices as a whole, the team has been able to, through portfolio construction exposures, absolute return exposures and various active mandates, keep up with or outperform their benchmarks year to date. That's a big mid-year number and I certainly wouldn't want to get ahead of ourselves until annual results are out.

Fair enough. I asked Justin about their new strategy and whether or not they are taking more risk in public or private equities. He replied:

It really impacts each asset class to ensure alignment with our overarching strategy and leaning into the structural development sources of edge across the AIMCo platform. 

Where we've made a few changes in public markets are really to ensure that we're providing the beta across our portfolio that our clients expect as efficiently as possible with a, I guess, renewed or refocused mandate from liquidity, collateral balance sheet management perspective.

And then the second part of that is ensuring the consistency of alpha generation across those mandates. So where we're taking active risk has evolved slightly with a focus on areas internally that we have a demonstrated capability or a proven track record and then certainly partnering with our external managers in areas where we feel active risk is attractively priced overall as we've seen, probably a slight reduction in active risk taking through security selection across the portfolio and an increase or maintain level of active risk and exposure through absolute return strategies internally and externally, both for direct client allocations to the absolute return product in their asset mix and/or portable alpha exposures on top of our synthetic beta within the equity platform.

I noted AIMCo uses a portable alpha structure to add alpha over their beta exposure and that absolute return strategies (hedge funds) have done well for all major pension funds over the last few years.

He replied: 

Yes. And I think we're in an environment where that can potentially continue as we see increasing dispersion between asset classes, certainly a higher base rate of interest rates that creates a return profile that should be a spread above those fixed income rates of return that tends to meet clients return expectations not only from a direct allocation perspective, but certainly as a very efficient form of active risk at the total client portfolio level.

I agree with that assertion and will add that higher interest rates also mean a higher hurdle rate for internal and external absolute return strategies as the T-bill rate has risen.

We moved on to private markets, where I noted that some headwinds are impacting private equity returns. I noted that certain segments of real estate seem to be turning the corner and infrastructure remains steady, providing pension funds with solid, long-dated, inflation-adjusted returns. 

Justin responded:

We spend a lot of time working with our clients and their respective asset class teams to really, I guess, hone in and define the role that those asset classes play in our clients’ portfolios. 

When thinking about what we need exposure to in this environment, obviously, we're looking for growth from a portfolio building block perspective, income, inflation protection, and broader diversification impacts or contribution at the client portfolio level. 

Specifically, infrastructure right now is fulfilling a number of those needs from a growth exposure to a degree, but primarily income and inflation protection as a function of the underlying quality of the portfolio, the quality of cash flows that are underwritten across the portfolio of assets. We're continuing to see attractive opportunities in infrastructure globally, both domestically and globally as it relates to our underlying product strategy. We're spending probably more time in the core-plus sub-segment of the market. There's a lot of competition for traditional core infrastructure assets, much like we had seen private credit over the last number of years when capital flows to parts of these markets, it can compress returns, and our view is that that sometimes creates opportunities where you might be not be fairly compensated for the overall risk that you're taking. 

So really with an overarching philosophy of looking for those opportunity sets across our asset classes where risk is attractively priced, let’s call it part art and science from a portfolio construction perspective.

And we’re seeing attractive deal flow there, pockets of private credit as well, despite valuations and credit spreads that are still slightly elevated. This just puts more importance on the underlying underwriting and structuring of this exposure in general. 

And then last but not least, you had mentioned private equity. And our private equity platform and strategy has been in place for over a decade now under Peter's leadership with , as you'll be familiar with, a fund and co-invest model overall. Certainly, we are seeing some green shoots as it relates to liquidity with capital markets activity and the IPO pipeline really coming to fruition. It feels like the market's been waiting for this for a number of years, and this amount of deal flow has been well received. That is a positive. We'd like to see that continue. We're assessing opportunities across certainly our manager and co-investment network, a growing secondary opportunity set in general and a broader capital solutions or strategic capital solutions opportunity set, which almost fits in between a private equity or private credit allocation, which we think is attractively priced risk exposure in general that is generated by our partnership network with both GPs and issuers. 

Coming back to the role that private equity plays in the portfolio and the roles we're looking for from our asset classes as they contribute to our clients’ total portfolios, the one of diversification stands out as well, given the underlying concentration across not only public equity markets but you're seeing a fair amount of underlying macro drivers, obviously associated with the proliferation of artificial intelligence and capex, impacting not only public equities, but investment-grade public fixed income, public credit, private credit exposures, and to a degree some infrastructure and real estate exposures as well. So looking at the role that private equity plays in diversifying the growth factor in portfolios in general, it's likely to be as important in the next five to 10 years as it has been over the last decade.

Justin kept hammering the point of why private equity remains an important asset class from a diversification perspective and he's right. When growth-oriented public equity indexes finally suffer a protracted bear market, whenever that happens, many value-oriented segments of private equity will finally outperform (stale pricing also adds to diversification).

I asked him if co-investments figure prominently in infrastructure at AIMCo as they do in private equity and he replied:

Our infrastructure portfolio is actually broad, and we do have obviously fund and co-investment relationships as well. Direct investments are a much smaller part of the private equity strategy at AIMCo and owing to the strategic tilt a little over 10 years ago with the refocus of the program on the fund relationship and co-investment model.

I asked Justin what he sees in Real Estate because from my discussions, it seems like there is an inflection going on there. He replied:

I would agree. Perhaps inflection is maybe too strong of a word. We are seeing attractive deal flow across a number of geographies and sectors within real estate as the industry recovers. At different places, there's a lot of differentiation, be it office, grocery, retail, multifamily, or industrial exposures, and also depending on geography. We do have a view that there are attractive opportunity sets today and we expect to be active in real estate over the coming quarters and years. And perhaps more of a continued gradual recovery than an inflection point or something that we would see a sharp reversal.

I asked him if it's fair to say AIMCo has more exposure to Canadian real estate than its peers and he replied:

I'm not sure comparing to the other funds. We have a Canadian and a global real estate product. Our Canadian product is larger than our global product and the two strategies have a bit of a different focus. Global product being traditionally more opportunistic and Canada being more focused and really aligned with where we're evolving our real estate program to ensure that those roles of income generation and inflation protection are present for our clients’ allocations.

I noted AIMCo's allocation to public markets is roughly 70% and asked him if they are happy with the current allocation to privates. He responded:

We're comfortable with current allocations as it stands. We do have, where we would be under allocated in private markets, those risk exposures are represented by public markets. So to the degree that we are allocating additional capital across infrastructure, real estate, private credit and or private equity, there could be small reductions in public market allocations. You're correct in your analysis, Leo, I believe as of mid-year, we’re just under 70% of public markets as a whole. We do include absolute return allocations, those direct allocations in the public equities illustration as you'll see in the report also.

I also noted some of their peers have increased their allocation to Canadian equities (notably OMERS) this year and asked him if they did so too. He replied:

Our allocations to Canadian equities are going to be a combination of what our client allocations are and any broader views from a diversification or active risk-taking perspectives that AIMCo is managing. 

We do have a fairly large allocation to Canadian (public) equities as we haven't seen any large shifts, either from client allocations or from our broader active risk-taking environment. Canadian equities do represent over 5% of the total portfolio. 

We don't necessarily set a target allocation based on geography; that's all going to be a function of really risk pricing, coming back to the overarching investment philosophy and that's underpinned by fundamentals and valuation. 

We certainly, we deal with a different type of concentration in the Canadian equity markets, and it has benefited client accounts given the relative pricing of that exposure and the performance over the last couple of years.

I asked if they hedge their US dollar exposure and he replied:

It depends on the product, Leo. We do hedge most of our US dollar exposure at the product level and at the benchmark level, but perhaps we can follow up on something more granular, if you'd like as well. 

Lastly, I noted AIMCo resides in Alberta and there are many geopolitical and trade currents right now in the background, so I asked him how they are reacting, if at all. He responded:

That's a good question. And I probably come back to the overarching philosophy that we're global investors. As we talked before, it really comes down to where we're finding the best opportunities from a risk-pricing perspective that align with our products and our client allocations as a whole. We have approximately 40% Canadian exposure across our broader product mix in general, and certainly to the extent that there are additional opportunities to allocate capital in Canada that are competitive from a risk-return perspective, then our teams are certainly engaged and looking for those opportunities as well.

We left it at that, covered quite a bit for the mid-year results.

Once again, I thank Justin Lord for taking the time to chat with me and I also wanted to thank Alexandra Zabjek for sharing the transcript with me because some of Justin's replies came out muffled on my end.   

Still, great interview, always enjoy catching up with Justin.

Below, AIMCo CIO Justin Lord shares more details on mid-year results  (also see clip here).

Muskan Arora of Markets Group reports Finland’s former pension chief says future cash flows, not markets, capped his risk appetite:

Timo Löyttyniemi, the former chief executive officer spent more than two decades running Finland’s state pension fund, Valtion Eläkerahasto (State Pension Fund of Finland), and in his account, the biggest constraint on his strategy in the final stretch wasn’t markets at all — it was future negative cash flows.

The government will pull an extra €1B out of the €25B fund next year, part of a broader pattern of tapping VER to help cover rising pension costs from an aging population. Löyttyniemi, who retired in February, said the fund ran extensive return simulations in response but left the harder structural decisions to his successor. “These extra outflows to the government made us postpone the plans somewhat during my time. But, of course, it’s now up to the new management to consider what the risk and sufficient and comfortable risk level is.”

“That will be also determined by future returns,” he added.

That caution shows up most clearly in a single number: 20%. That’s roughly where Löyttyniemi held VER’s private markets exposure — private equity, private credit, infrastructure and real estate combined — through nearly his entire tenure, even as other Finnish pension funds pushed allocations north of 40%, some blending in hedge funds to get there. He never reversed the strategy. He simply wouldn’t let it grow once outflows started climbing.

“When there’s uncertainty in terms of the cash flows . . . the size of the private portfolio cannot be increased aggressively,” he said, pointing to a forward return expectation near 5.5%, against outflows already running four to five percentage points a year.

Löyttyniemi is more assertive discussing the one strategic reversal he did make. VER lifted its prohibition on defense investment in spring 2022, rewriting its sustainability framework within weeks of Russia’s invasion of Ukraine. The policy shift itself was fast; getting the market to believe it was another matter. He says he spent few years afterward correcting consultants, banks and even VER’s own private equity managers who assumed the old restrictions still applied.

“I realized going forward that people still thought that there were some restrictions, and I really wanted everyone to understand,” he said. VER’s direct exposure ran mainly through Nordic — largely Swedish — defense-adjacent equities, layered on indirect exposure through index products that had been quietly compounding the theme all along. Now, he sees huge demand in physical products, such as Information and Communication Technology security and drones.

He’s just as direct in dismissing geopolitics as a filter for developed market decisions. Europe, the Nordics, the U.S. and developed Asia, he said, were never debated internally on political grounds during his tenure — the closest exception came in 2025, when U.S. tax-policy uncertainty pushed VER toward more conservative commitment sizing on U.S.-linked private market products. China is the one market where he pushes back hardest against the geopolitical framing altogether. During his tenure, VER kept its exposure to Chinese equities and fixed income deliberately low throughout his tenure, noting the real driver isn’t politics.

“It seems to boil down to the low profitability of these companies,” he said, pointing to high-volume, low-margin businesses with weak earnings growth.

“So this is more an economical than geopolitical issue but both play a role.”

On manager selection, Löyttyniemi credits VER’s edge to accumulated diligence rather than any single call. Re-upping with an existing manager was, in his words, “an easier decision” than backing a new one, since years of prior scrutiny had already resolved most of the uncertainty a first-time relationship carries. What his team weighed most heavily wasn’t short-term performance but succession — whether younger partners were stepping up as a manager’s founders aged out.

He is similarly unequivocal about Silicon Valley Bank’s collapse in March 2023, which he called an idiosyncratic failure of specific banks rather than a systemic event, though he pointed out that three years later, the fallout has been contained. Still, he cautioned that every crisis has its own features and today’s playbook won’t necessarily transfer cleanly to the next one.  

I don't normally cover Finnish pension plans, but I like this profile article and wanted to bring it to your attention.

Timo Löyttyniemi, the former CEO of Finland’s state pension fund, Valtion Eläkerahasto (VER), shares a lot of wisdom here. He is a finance professional and an academic working at the intersection of business and government.

The biggest takeaway is when you are a mature pension plan -- where retired members considerably outnumber younger active members and outflows outpace inflows by a wide margin -- then you simply cannot take on too much risk in private markets; it's irresponsible. 

His cutoff for an allocation to privates was 20% of total assets, a decision he made with confidence given the maturity of this pension plan. 

The decision had nothing to do with the state of private markets but everything to do with the fact that they can't afford to run short of funds to pay out pensions to retired members. 

He even says it's all about certainty of cash flows, stating this:

“When there’s uncertainty in terms of the cash flows . . . the size of the private portfolio cannot be increased aggressively,” he said, pointing to a forward return expectation near 5.5%, against outflows already running four to five percentage points a year. 

I don't know where he gets his "forward return expectation" for privates at 5.5% (seems low to me)  but if outflows are running at 5% a year, and if he's assumptions are right, then a 20% max allocation for privates sounds about right. 

I also agree with his decision to keep Chinese equities and fixed income deliberately low based on the economic, not political, arguments he puts forth.

Lastly, I agree with VER's private equity approach:

 On manager selection, Löyttyniemi credits VER’s edge to accumulated diligence rather than any single call. Re-upping with an existing manager was, in his words, “an easier decision” than backing a new one, since years of prior scrutiny had already resolved most of the uncertainty a first-time relationship carries. What his team weighed most heavily wasn’t short-term performance but succession — whether younger partners were stepping up as a manager’s founders aged out.

Too many dumb pension funds focus on short-term performance and not enough on succession. And the results are typically disastrous when you chase performance without understanding the underlying team.

Alright, quick comment tonight, still in summer mode.

Below, private markets have stalled since interest rates started to rise in 2022, even as public markets have climbed to new highs. But a period of sustained economic growth along with rising liquidity and AI-driven innovation could help private markets rebound, according to Goldman Sachs' Pete Lyon and Michael Brandmeyer. 

Despite longer private equity holding times and mixed performance from private credit funds, they remain cautiously optimistic, projecting that distributions will gradually return to 15%-20% and that deal activity could exceed its 2021 peak within two to three years.

No big surprise that Goldman sees a sustained recovery in private equity. Hope they're right.