CALGARY -- Alberta’s $71-billion pension fund has its eye on food, energy and materials sectors, but argues investing directly in commodities in not the best way to reap the rewards.

Leo de Bever, Alberta Investment Management Corp.’s chief executive, said that while his fund does not have any restrictions on where it can invest, he would rather it put money behind good management teams operating in businesses tied to commodities, rather than resources itself.

“We think it is a better way to play than betting on commodity prices,” he told reporters in Calgary yesterday. “The problem with commodities is they used to be much more lucrative than now. Part of that is too many people have gotten in to that.”

AIMCo’s “relationship investing” strategy is highlighted by its ties to Viterra Inc., which bills itself as an ingredients company. AIMCo has helped the company’s international expansion efforts and now has its eye on potential deals in Latin America.

It is Viterra Inc.’s largest shareholder, controlling about 15% of its stock, and providing financing where necessary. When Viterra picked off Australia’s ABB Grain, it did so with AIMCo’s financial backing.

“We are now working with Viterra to see if there are relationships around the world that would fit this now-bigger company,” he said. “The one that comes to mind in terms of where grain is produced is Latin America.”

Viterra would not comment on any expansion plans.

Mr. de Bever said that while small, direct commodity investments can serve as hedges against inflation, the commodities market is dangerous right now because Contango is at play, meaning that some of the futures prices are higher than the spot prices. He wants to avoid this messy market.

Another example of how AIMCo indirectly plays the commodity market is its investment in Precision Drilling Corp., a Calgary-based outfit in which it owns stock and has provided financing.

Mr. de Bever also said his company is not interested in getting involved in a bidding war for Potash Corp. of Saskatchewan, which is facing a hostile offer from BHP Billiton PLC. Even though Potash Corp. is directly tied to the food industry because it is a powerhouse of a fertilizer company, AIMCo is staying away because at the prices being kicked around now, it cannot make enough money to justify the investment, he said.

AIMCo has been approached by some of Asia’s sovereign wealth funds about partnering a possible bid for BHP, Mr. de Bever said.

Financial Post

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