"WOULD YOU TELL ME, please, which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the Cat.
"I don't much care where—" said Alice.
"Then it doesn't matter which way you go," said the Cat.
"—so long as I get somewhere," Alice added as an explanation.
"Oh, you're sure to do that," said the Cat, "if you only walk long enough."
That passage from Lewis Carroll's Alice's Adventures in Wonderland, recreated as an illustrated wall hanging, is a conspicuous presence in Leo de Bever's otherwise bare Edmonton office. "It epitomizes a lot of what goes on in the investment industry," explains the ashen-voiced chief executive of the newly formed Alberta Investment Management Corp. (AIMCo). "We chase benchmarks that have no relevance for our clients. People are so focused on their benchmarks that sometimes they confuse what's really important."
Nobody could accuse de Bever of lacking a clear purpose. His task is to take $71 billion that used to be managed by Alberta Finance on behalf of six pension funds and several government endowments and investment accounts, and build around it a sophisticated, independent asset manager that takes the risks—and produces the higher returns—that were lacking when the bureaucrats were in charge. De Bever figures it will take him five years to do that, while simultaneously establishing AIMCo's freedom from government—much like the Ontario Teachers' Pension Plan, which he helped develop into a world-class fund. "The government wants AIMCo to be a symbol of what Alberta can do," he says. "Five years from now, if this organization functions well, has some depth, if I can replace myself and senior staff who are my vintage, I think we'll have done the job that I came here to do."
After years of debate and two false starts, the Alberta government has shown it's ready to make that happen. It established AIMCo on Jan. 1, 2008, and put in place a board composed of leading business figures, including former TD Bank head Charles Baillie as chairman. The board tapped de Bever as AIMCo's CEO—a job he'd turned down once before, when the fund was still under provincial control. "What the government has done has been courageous in a political sense," de Bever says of AIMCo's creation. "Governments are all about not making mistakes, about not taking any risks that can come back to bite them. There is a fundamentally different culture in an organization like this."
De Bever is now seven months into a job that couldn't have started at a worse time. Capital markets are lurching sickeningly, and giant institutional investors have been particularly hard hit: Endowment funds for Yale and Harvard, as well as the California Public Employees' Retirement System, saw their portfolios slashed by 20% to 30% in the last half of 2008. Canadian pension funds, meanwhile, took a record tumble last year, losing 15.9% overall, according to RBC Dexia.
AIMCo, one of Canada's largest capital pools, is in a stronger position: When the price of oil skyrocketed, the province's take from non-renewable resources, which averaged $11.6 billion in each of the last two fiscal years, accumulated in low-risk, fixed-income assets. "We have more liquidity than most funds," de Bever says.
Still, transforming AIMCo now "is like trying to put a roof on a house in the middle of a hurricane," he acknowledges. "Some members of my staff are nervous. They're saying, 'How are we going to execute this vision you have in the middle of all this doom and gloom?'"
Middle of it? In Alberta, the doom and gloom has barely begun. The price of oil is down by roughly $100 (U.S.) a barrel since its peak last year. And a growing number of critics are convinced the government has lost its way, having relied too heavily on its resource revenues to fund government spending and failing to salt away enough cash during the good years. "If you're smart, you forgo some prosperity in order to gain future stability," says Allan Warrack, a former cabinet colleague of Conservative Premier Peter Lougheed and business professor emeritus at the University of Alberta. "Economic strength is not just prosperity, but stability. We in Alberta not only didn't do that—we made it worse."
