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Earlier this year, Alberta Premier Jason Kenney, seen here in Edmonton on March 20, 2020, proposed moving Alberta’s contribution to the Canada Pension Plan into the Edmonton-based AIMCo.

JASON FRANSON/The Canadian Press

Significant losses at Alberta’s government-owned money manager have dealt a major setback to the province’s flagship heritage fund.

Amid unprecedented swings in the market owing to the impact of the COVID-19 virus, Alberta Investment Management Corp. (AIMCo) lost an estimated $4-billion in recent weeks on derivatives, investments that pay off only if stock prices remain stable, according to sources at AIMCo clients. This is in addition to other losses on its stocks, bonds and real estate. The money manager oversees 31 provincial pension plans and endowments and has a portfolio of $119-billion.

The Globe and Mail disclosed the losses on Wednesday and is not naming the people because they are not authorized to speak about AIMCo’s performance.

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Some AIMCo clients, including the $50-billion Local Authorities Pension Plan (LAPP), and the $4.8-billion Universities Academic Pension Plan, told AIMCo to limit their exposure to strategies tied to market volatility, or use more than one investment manager. As a result, these plans expect to be spared from some of the fallout from AIMCo’s poor performance.

But the $18-billion Alberta Heritage Savings Trust Fund, which was built from oil and gas royalties, is 100 per cent managed by AIMCo, and was fully exposed to the fund manager’s strategies, resulting in a significant loss in March and April, sources said. Income from the Heritage fund – $43-billion since it was founded in 1976 – is earmarked for public projects such as schools and hospitals.

Who feels the pain

on AIMCo losses?

The Alberta Investment Management Corp.

(AIMCo) oversees $119-billion for 31 provincial

clients. Top 10 AIMCo clients, in billions of dollars

Local Authorities Pension Plan

$44

Alberta Heritage Savings Trust

 

18

Public Service Pension Plan

14

Management Empl. Pension Plan

5

Universities Acad. Pension Plan

 

4

Special Forces Pension Plan

3

Agricultural Crop Insurance

2.5

Heritage Medical Research

2

1.3

Heritage Scholarship Trust

Heritage for Science & Eng.

1.2

JOHN SOPINSKI/THE GLOBE AND MAIL

SOURCe: aimco 2018 annual report

Who feels the pain on AIMCo losses?

The Alberta Investment Management Corp. (AIMCo)

oversees $119-billion for 31 provincial clients. Top 10

AIMCo clients, in billions of dollars

Local Authorities Pension Plan

$44

Alberta Heritage Savings Trust

 

18

Public Service Pension Plan

14

Management Empl. Pension Plan

5

Universities Acad. Pension Plan

 

4

Special Forces Pension Plan

3

Agricultural Crop Insurance

2.5

Heritage Medical Research

2

1.3

Heritage Scholarship Trust

Heritage for Science & Eng.

1.2

JOHN SOPINSKI/THE GLOBE AND MAIL

SOURCe: aimco 2018 annual report

Who feels the pain on AIMCo losses?

The Alberta Investment Management Corp. (AIMCo) oversees $119-billion

for 31 provincial clients. Top 10 AIMCo clients, in billions of dollars

$44

Local Authorities Pension Plan

Alberta Heritage Savings Trust

 

18

Public Service Pension Plan

14

Management Employees Pension Plan

5

Universities Academic Pension Plan

 

4

Special Forces Pension Plan

3

2.5

Agricultural Crop Insurance

Heritage Medical Research

2

Heritage Scholarship Trust

1.3

1.2

Heritage for Science & Engineering

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCe: aimco 2018 annual report

Earlier this year, Alberta Premier Jason Kenney proposed moving Alberta’s contribution to the Canada Pension Plan into the Edmonton-based AIMCo. The provincial government also announced plans last year to move the independently run, $18-billion Alberta teachers’ pension plan into AIMCo.

Mr. Kenney said the idea of moving Alberta’s CPP funds is not based on AIMCo’s investment strategies, but the fact that the contributions are a net transfer of wealth outside the province.

“It’s quite reasonable for Albertans to ask whether we’d be better off and be able to operate a public pension plan with lower premiums that would help us to create more jobs while keeping those returns here in Alberta,” he told reporters on Wednesday.

He said the question would be addressed when the health crisis is over and after a report is released from a panel studying whether federal programs serve Alberta well.

Critics pointed to AIMCo’s losses as a reason to abandon any notion of expanding the fund manager.

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Rachel Notley, leader of the opposition NDP and former premier, said she was troubled to learn that “specific management decisions" have made the stock market crash worse for AIMCo, and called for more information on the losses.

“This is a clear message to Jason Kenney and [Finance Minister] Travis Toews to stop all talk of forcing Albertans to put their CPP money into AIMCo, and also they should stop all talk of forcing the teachers to put their pension money into AIMCo," Ms. Notley said.

On Wednesday, Jerrica Goodwin, spokeswoman for Mr. Toews, said AIMCo’s volatility-based strategy was put in place before the UCP government was elected a year ago. She also said the Crown corporation makes its investment decisions independent of the government. She declined to comment on whether the strategy’s level of risk was acceptable.

“We understand AIMCo has been briefing its clients and will continue to do so," Ms. Goodwin said in an e-mail. "The minister has been briefed and will be receiving updates as AIMCo conducts its review, and will scrutinize that review.

“The Premier has been very clear that any hypothetical change to an Alberta pension plan would be put to a democratic referendum to be voted on by Albertans,” Ms. Goodwin said. “In any event, no decision has been made on whether to even try pursuing an Alberta pension plan."

Last year, the Kenney government passed legislation that will put the pensions of the province’s teachers under the umbrella of AIMCo. The Alberta Teachers’ Association (ATA) has been staunchly against the move, arguing that its current manager, the Alberta Teachers Retirement Fund (ATRF) has provided above-average returns for its retirees for decades and gives members a say in investment strategies.

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Jason Schilling, president of the ATA, said AIMCo’s loss has only added to teachers’ fears of being exposed to higher risk after the shift, which is due to be completed at the end of 2021.

“What we have out of The Globe and Mail article that was released yesterday was kind of teachers’ worst fears,” Mr. Schilling said. “I know that teachers have been contacting MLAs, they’ve been phoning them, they’ve been e-mailing, they’ve been trying to impress on them that they still have time to repeal Bill 22.”

The union will express concerns to the government as well, he said.

The teachers’ fund said in a statement that it is working to ensure its members are not exposed to "extreme risk” as it transfers administration to AIMCo.

“We are concerned about the additional losses that AIMCo clients are incurring as a result of a specific strategy,” ATRF chief executive officer Rod Matheson said in the statement. “We have focused on setting up the relationship with AIMCo in a way that protects the interests of our plans and plan members, and this is a good reminder for us of the importance of that work.

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