How first job after studies shaped career of AIMA Canada’s head

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Alternative investments, both public and private, can offer investors a diversified, non-correlated addition to a portfolio – an important step in risk reduction in today’s market and why they are becoming more popular with pension and endowment funds, as well as high-net-worth non-institutional investors.

Claire Van Wyk-Allan, head of Canada and managing director at the Alternative Investment Management Association (AIMA, a global association for hedge funds, private credit and digital assets) since 2018, offers insights into what to expect from these investments and why she is so passionate about alternatives.

A graduate of the University of Western Ontario with a Bachelor of Management and Organizational Studies, specializing in Finance, Van Wyk-Allan, who is based in Toronto, has more than 14 years of professional experience in alternative investments, leadership, strategy and business development.

What was your thought process or educational journey that brought you to a career in finance?

Having grown up with two working parents in a rural community in southwestern Ontario, where I helped out frequently on my grandparents’ farm, I was taught very early in life the value of hard work and earning a dollar. I wanted to work in an industry that was intellectually stimulating and in an organization with strong values where I could help make a real difference for individuals, families and firms.

What was the trajectory that brought you to your current position as head of AIMA Canada, in terms of your own decisions and the support you received?

I started my career after university, by chance, at a hedge fund and got involved nearly right away with AIMA events and programming. This led to volunteer leadership positions on committees and being asked to join the AIMA Canada Executive Committee in 2014 (the first female represented here). When the Head of Canada role opened in 2018, the executive committee chair asked if I would consider joining AIMA as staff, so I jumped in and was grateful to turn a 10-year passion project into a full-time role.

What role do alternatives play in investment holdings?

Public and private alternative investments often offer diversified, non-correlated risk-adjusted returns with protection from volatility alongside niche investment opportunities. They feature diverse leverage and liquidity profiles, so these should be considered alongside other potential benefits and risks before investing in the context of a larger portfolio.

Are there particular considerations for Canadian investors and asset managers?

Canadian pension investors have long been leaders in investing in alternative asset managers, with alternatives often representing close to or over 50 per cent of AUM [assets under management] across public and private alternatives, managed with a total portfolio approach in mind.

ESG [environment, social, governance] considerations are also important for Canadian investors, with Maple Eight [Canada’s major] pensions being leaders in governance, climate change commitments and DE&I [diversity, equity, and inclusion] support.

As companies remain private longer and bank lending retrenchment continues, public and private alternatives will increase in their importance in both institutional, family office and retail portfolios. Canada is a sound regulatory jurisdiction and a popular destination for UHNW families, built on proven financial-services sector strength and a backbone of natural resources, and we continue to see increased competition for distribution to Canada’s wealth platforms.

Is there anything to be cautious about in this space for investors (depending on the investor or asset manager’s strategy)?

There is always lots to be cautious about in financial markets. Initial and ongoing due diligence is important to make sure that investors fully understand the manager, strategy and fund-structure features.

Managers should align with their investors while adhering to strong global operational and sound practices with regards to policies and procedures.

To highlight just some areas to understand before investing: governance controls, compliance culture, conflicts of interest, separation of duties, dual signatures, position limits, leverage limits, fund liquidity vs liquidity of the underlying assets, fee structures, valuation policy, outsourced service partners and more.

For private credit, leaning into a manager’s workout [renegotiation terms in default cases] history and loan terms, including covenants, is also important.

Do non-institutional investors such as family offices have different considerations in the alternatives space than institutional investors?

Family offices often can be more flexible in allocations, both in timing and sizing, than larger investors, which may allow for niche access opportunities. They may have different liquidity needs or policy objectives with regards to sustainability, for example, and they should look to align these with managers.

What are some top-level trends in alternative investments?

Institutional investors continue to allocate to hedge funds and private credit with an eye on diversifying portfolios and reducing risk in portfolios.

In hedge funds, our Alignment of Interest research shows strategic relationships are being deepened through knowledge-sharing and innovative fee models, with new product structures and share classes that reward longer lock-up periods in exchange for fee discounts. While management fees remain below the historic 2-per-cent level, rising operational costs are being supplemented by more fees being charged to the fund pass-through to investors.

Culture, technological innovation and succession planning are increasingly important as founders seek to build on the foundations of their franchises while creating space for next-generation leaders to step forward and deliver repeatable alpha.

In private credit, our annual Financing the Economy research highlights that flexibility, speed of execution and direct relationships with borrowers remain key features of private credit. For investors, these attributes also continue to be an important driver of returns, with private credit fund managers able to address stress more proactively and effectively than other lenders.

What is the biggest stressor for alternative investors or asset managers right now?

With higher base rates, investor expectations for alternative managers are equally challenging, and conversations around hurdle rates [minimum acceptable rate of return], benchmarks and valuations are in flux.

The complexity of the geopolitical environment and subsequent supply-chain considerations are in focus for managers and investors alike.

Investors may still be experiencing a denominator effect, where the value of one portion of a portfolio has decreased disproportionately relative to other portions, causing misalignment with strategic asset allocation.

Investors are mindful of capital commitments and managing liquidity in this context, while ensuring they have cash on hand to deploy for interesting opportunities.

What is something about you that people would be surprised to learn?

I play soccer with one of our AIMA members in a co-ed intramural summer league, reprising my amateur sports career after a 12-year hiatus. It’s been a joy to rediscover an old hobby, make new friends and be part of this team, while having my two- and six-year-old boys watching me do my best while cheering us on from the sidelines.

Responses have been lightly edited for clarity and length.

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