(Bloomberg) -- Executives at British Columbia’s public pension manager say they’re getting creative in allocating money — making bets on asset classes including private credit and infrastructure debt — during a prolonged soft patch for dealmaking. 

British Columbia Investment Management Corp. is also eyeing opportunities in real estate debt in sectors including industrial, multifamily and student housing, according to Ramy Rayes, executive vice-president of investment strategy and risk.  

“The markets are still relatively slow, so we need to be creative in our dealmaking activity,” Rayes said in an interview. “In our case, it’s going to be about value creation, about how we can engineer returns in areas that we haven’t necessarily done in the past.” 

BCI closed on three infrastructure debt investments during the fiscal year ended March 31, including European mobile telecommunications tower operator Vantage Towers and EdgeConneX, a data center provider, according to its annual report. It has also acted as an anchor investor in Overland Advantage, a new direct lending platform established by Centerbridge Partners and Wells Fargo & Co. 

“We don’t want to be just the ones buying the paper, we want to be the ones behind the origination or the anchoring of this business,” Rayes said.  

Private debt holdings delivered a 13.3% return to BCI the fiscal year, and the fund deployed around $2 billion to the asset class, focused on “opportunities in the middle and lower middle markets and expanding the program to Asia,” according to a statement.

Overall, the fund posted a 7.5% return, boosted by global and Canadian stocks, which returned 26.5% and 14.6%, respectively. 

Net assets were C$229.5 billion ($168 billion). About 83% of the assets are managed in-house versus 59.4% a decade ago. 

Real estate equity lost 5% as valuations changed “in response to the rising rates with the global office sector the most directly impacted,” according to the annual report. BCI reduced its office exposure to 19% of property holdings last year, from 40% in 2016.  

Canada’s largest pension plans have been reducing their exposure to office and retail assets after high borrowing costs and structural changes upended the economics of the sector. The largest fund, Canada Pension Plan Investment Board, has about 8% of its assets in property, down from 12% five years ago.

In private equity, BCI committed C$2.9 billion to fund investments and existing direct investments to support the companies’ growth. 

“As rates start falling, or at least when the market has a strong conviction that rates are on their way down, you will see the activity go up,” Rayes said about the slow pace of deals. “Right now, it’s a bit of a standstill and everybody’s watching.” 

©2024 Bloomberg L.P.