October 6, 2009 / 8:28 PM / 8 years ago

UPDATE 2-Alberta fund manager weighing private equity deals

* Looking at deals around C$200 mln "sweet spot"

* AimCo had total 2008-09 return of -10.1 pct

* Private-sector investments must lead rest of recovery (Adds quotes, details)

By Jeffrey Jones

CALGARY, Alberta, Oct 6 (Reuters) - Alberta's public-sector fund manager is running the numbers on a half-dozen private equity deals around the world as it looks to take advantage of a recovering economy after a year of negative returns, its chief executive said on Tuesday.

Alberta Investment Management Corp, which manages about C$70 billion ($66 billion) in government accounts and pensions in the energy-rich Canadian province, has a deal-value "sweet spot" of about C$200 million for such transactions, AimCo CEO Leo de Bever said.

There is no deadline for the company to finalize investments it is considering, de Bever told reporters, following the release of Edmonton-based AimCo's annual report.

"There are two that I can think of that you'll hear about before the end of the year," he said. "You have to understand that for every 10 opportunities that we look at, nine hit the trash can within weeks and maybe with one in 10 we start doing due diligence on and start trying to ... structure a deal."

AimCo, created by the Alberta government as an arm's-length fund manager 22 months ago, has made headlines with some large transactions in the past year. Those included a C$290 million financing deal to help Precision Drilling Trust PD_u.TO solve its debt problems, and a C$220 million investment in Viterra Inc VT.TO as Canada's largest grain handler acquired an Australian rival.

The company is considering deals in the United States, United Kingdom, Canada and Australia, he said.

Private equity investing has undergone a major shift after the market meltdown of 2008 and 2009, de Bever said.

"The big mega-deals in private equity that were based on cheap credit and enormous leverage -- they're not going to come back. It's going to be a totally different environment where the fundamentals of the business are much more significant."

Overall, AimCo had a total return of -10.1 percent for the year ended March 31, according to the annual report, but returns in its various funds varied.

Pensions and endowments dropped 18 percent in value, while government funds, which were invested in short-term fixed income instruments, earned 3.3 percent.

The world economy is in recovery, but the effects of massive amounts of government stimulus money have run their course and now the private sector must resume investment for improvements to continue, de Bever said.

"That is going to be difficult in an environment most organizations, most firms are not quite sure what the future will bring so they are being very cautious," de Bever said. "But eventually there's going to be so much pent up demand for investment that they can no longer postpone it."

Today, some of the best opportunities for investments are in public infrastructure, as governments stopped spending on upkeep of power transmission lines as well as water and sewer systems, he said.

Meanwhile, after major gains in the stock market since March, the next six months to a year may show a "sloppy to downward trend" as investors remain uncertain about the pace of recovery in the economy and corporate earnings, de Bever said.

For AimCo, he is working on chopping the money the company currently spends on outside management, a sum that rang in at C$174 million last year. Within three years, he aims to get that down to about C$100 million.

Initiatives will include increasing AimCo's own staff number to about 250 from the current 190, de Bever said.

$1=$1.06 Canadian Editing by Frank McGurty

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