The chief investment officer of Alberta Investment Management Corp. is cautiously optimistic about the rest of 2024 after reporting mixed results for the first half of the year, anticipating a potential rebound in equity and bond markets if central banks implement expected interest rate cuts.

According to Marlene Puffer, who joined AIMCo as CIO last year, monetary policy decisions are “the big variable” for markets in the coming months. Federal Reserve Chairman Jerome Powell said last week that “the time has come” for a change in central bank policy, and markets are now pricing in a September rate cut, with more on the way.

If the Fed follows through on its plan, “the economy will have tailwinds,” Puffer said. “But there’s a lot of geopolitical uncertainty and a lot of variables that could mess that up.”

AIMCo reported a return of 5.4 percent across all its funds for the first half of 2024, according to a half-year report the pension fund manager released on Tuesday. Its balanced fund, which reflects a typical mix of client assets, returned 5.6 percent over the same six-month period.

Over a ten-year period, the balanced fund generates an average annual investment gain of 7.2 percent, corresponding to a net investment return of $63.3 billion.

AIMCo invests on behalf of 17 pension, foundation, insurance and government clients in Alberta. The company currently has assets of nearly $169 billion, up from $161 billion at the beginning of the year.

“I am quite satisfied with our performance so far,” said Ms. Puffer.

AIMCo’s half-year update does not include a detailed breakdown of the performance of each asset class in its investment portfolio. But the listed stocks that the company owns, which make up about 37 percent of its investments, delivered the strongest investment gains in the first half. “That was really the tailwind for us,” Ms. Puffer said.

AIMCo also reported gains from investments in infrastructure, renewable resources, mortgages, private debt and private equity.

Although stock market gains have been fueled for some time by a group of large U.S. technology giants – a group dubbed the “Magnificent Seven” that includes Apple Inc., Amazon.com Inc., electric-vehicle maker Tesla Inc. and chipmaker NVIDIA Corp. – Ms. Puffer cites a period in June when small-cap stocks outperformed their larger rivals as a possible sign that the broader market is beginning to reassert itself.

“It remains to be seen whether this trend will continue, but it has taken the wind out of the sails of the Magnificent Seven,” she said.

Returns on private assets have been choppy, with real estate remaining a sore spot. Puffer said some larger real estate assets were trading in the market, but in the more troubled areas of the office and retail sectors, property values ​​were still murky.

By contrast, AIMCo still makes strong profits from its personal lending and loan business, which invests in a growing market for loans to private companies. That market has become increasingly crowded and competitive, and defaults have risen slightly as more companies collapse under the pressure of a slowing economy and high borrowing costs. Even so, “we still feel very comfortable in that space,” Puffer said. “We’re not chasing deals. We’re not sacrificing quality, even though we still have capital to deploy.”