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Alberta’s government-owned fund manager confirmed significant investment losses on Wednesday, adding fuel to a heated debate over Premier Jason Kenney’s plan to shift more of the province’s retirement savings into its care.

The Alberta Investment Management Corp., known as AIMCo, took a 10.2 per cent loss in the first three months of the year on a $50-billion portfolio belonging to the largest of its 31 clients, a fund for health care and municipal workers called the Local Authorities Pension Plan, or LAPP. AIMCo also invests the Heritage Savings Trust Fund, a provincial war chest funded by royalties on oil and gas companies.

This was the first public release of overall performance at AIMCo. The loss came when industry data show the median return for Canadian pension plans in this period, which includes the COVID-19 induced market sell off in late March, was a 7 per cent decline. Another AIMCo client, the $3-billion Special Forces Pension ​Plan for police officers, reported on Wednesday that their fund was down 12.2 per cent in the first quarter, compared with a 6.7 per cent decline in their benchmark.

A significant portion of AIMCo’s decline reflected investments linked to market volatility. The Edmonton-based fund manager previously estimated it will lose a total of $2.1-billion on this strategy, on total assets of $119-billion. But figures released on Wednesday show the fund manager turned in poor results in stock, bonds, real estate and private equity.

“The volatility strategy was an unfortunate situation that has had plenty of attention, but these numbers do confirm that AIMCo has underperformed compared to benchmarks across virtually all of the asset categories in which they invest for us," said LAPP chief executive Chris Brown in an interview. LAPP’s own results were tempered by a “downside protection” strategy it employed on its own, which counteracted the losses by $1.9-billion. It assured its members that the plan remains well funded and their retirement savings are safe.

Last year, LAPP said AIMCo’s results fell short of the pension plan’s value-added expectations for 46 consecutive quarters, or 11 years and 6 months.

AIMCo CEO Kevin Uebelein said the Crown corporation felt the “extreme pain” experienced by all investors.

“We actively reviewed and recalibrated our strategies to limit losses and have openly communicated with our clients through this challenging quarter,” he said in a statement. “Meanwhile, we’ve already seen global markets rebound from their first quarter lows.

”AIMCo employs a diversification strategy, but it proved to be less beneficial when all asset classes suffered at the same time, spokesman Denes Nemeth said.

AIMCo’s performance is a significant political issue for Alberta’s governing United Conservative Party, which announced plans last fall to move an $18-billion retirement fund for the province’s teachers under the AIMCo umbrella next year, a move the teachers’ unions opposes. In a press release on Tuesday, the Alberta Teachers’ Association said: “The Alberta teachers’ pension fund would be worth $1.3 billion less today if it had been managed by AIMCo rather than the Alberta Teachers’ Retirement Fund.”

The teachers’ union found their existing fund managers turned in better performance than AIMCo in each of the past seven years. Alberta Teachers’ Association president said the results "refutes the government’s ongoing claim that the management transfer to AIMCo will save money through reduced expenses. "

Mr. Kenney also raised the idea of moving Alberta’s contributions to the Canada Pension Plan into AIMCo. A 2019 study by the Fraser Institute found that over the past decade, Albertans made a cumulative net contribution of $27.9 billion to the CPP. The study concluded: “Alberta disproportionately contributes to a host of national and federal programs.”

While AIMCo does not release quarterly results, data released by LAPP as part of its normal quarterly disclosure shows that the fund manager’s equity market investments were down by 24.1 per cent, compared with a 16.5 per cent decline in its benchmark. The poor performance reflected volatility-linked investments and a heavy weighting on value stocks, which fared poorly during the market’s nose dive in March.

In April, Mr. Uebelein apologized for the losses on volatility trading, and said in an open letter: “Let me be clear, the performance of this investment is wholly unsatisfactory, and AIMCo’s board and management share the frustration and disappointment of our clients, their beneficiaries and all Albertans."

AIMCo’s real estate investment, which include shopping malls, were down by 4.1 per cent, compared with a 1.8 per cent rise in the benchmark. Its private equity investment were down 1.5 per cent, while the bench mark in this asset class was up by 2.2 per cent. The fund manager’s infrastructure investments were down 3.5 per cent, while the benchmark rose by 1.7 per cent. AIMCo’s fixed income investment were up by 0.2 per cent, while the benchmark was up 1.7 per cent.

Last month, AIMCo’s board launched an independent investigation into the fund manager’s losses on investments linked to volatility, led by accounting firm KPMG LLP and a former executive at the Ontario Teachers’ Pension Plan. AIMCo employees are among the best paid government workers in Alberta: Its chief executive officer and chief investment officer made $3.4-million and $3.6-million respectively last year.

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