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Canadians can take comfort from knowing their pension plan was well-managed during a brutal market meltdown. However, Albertans have new reasons to worry about poor performance from their government-owned fund manager.

The Canada Pension Plan Investment Board, known as the CPPIB, released its annual results on Tuesday, with the $409-billion fund manager turning in best-in-class results. The numbers stand in stark contrast to the losses in recent months at the Alberta Investment Management Corp., or AIMCo, a provincial fund manager with $119-billion of assets and a similar long-term investment approach.

Because CPPIB reports results for a fiscal year that ends on March 31, the fund manager’s latest performance reflects the sharp selloff that rocked markets in late March, as investors dealt with the economic impact of the COVID-19 pandemic. In a historically bad quarter, when the S&P/TSX benchmark fell by 21 per cent, the CPPIB posted a 3.7-per-cent loss. Over the past 12 months, the fund was up 3.1 per cent, handily beating its benchmark. If the fund manager were a hockey player, these would be Wayne Gretzky or Connor McDavid numbers.

Edmonton-based AIMCo, on the other hand, has the dubious distinction of being among the worst-performing Canadian pension plans during the recent downturn, posting stats that would get a player cut from the Edmonton Oilers. Contrasting its results to CPPIB – an apples-to-apples comparison – also shows the Alberta fund suffered outsized losses on investment strategies linked to market volatility.

AIMCo manages money for 31 provincial clients, including government employees’ pension plans and the $18-billion Alberta Heritage Savings Trust Fund, the province’s war chest derived from oil royalties. AIMCo’s largest client is the Local Authorities Pension Plan, known as LAPP, which invests for health care workers and entrusts the fund manager with $50-billion.

While AIMCo hasn’t released first-quarter performance results yet, LAPP recently provided its members with an update that showed investment losses cut the plan’s funded ratio – its invested assets compared to its pension liabilities - by 13.4 per cent in the first three months of the year. LAPP still has a surplus, with $1.10 in assets for every dollar of liabilities. LAPP chief executive officer Chris Brown broke down the drop by explaining 7.2 per cent of the decline reflected the market meltdown, while 4 per cent of the drop came from “AIMCo active management losses” and 2.2 per cent of the fall came from investments linked to market volatility. Mr. Brown said LAPP executives “continue to seek a full understanding of the losses and what led to them.”

To put these numbers in perspective, the median pension plan recorded a 7.1-per-cent loss in the first three months of the year, according to data compiled by a division of Royal Bank of Canada. However, there was a wide range of results, with the top 5 per cent of plan managers down just 2.9 per cent. That’s the standard CPPIB hit.

The bottom 5 per cent of pension plans were down by an average of 12.7 per cent, according to RBC Investor and Treasury Services. That’s AIMCo’s neighbourhood.

When it comes to investment related to volatility – a strategy in place at both CPPIB and AIMCo – the federal fund manager said on Tuesday it lost a total of $640-million on the approach last year, which CPPIB sources say was in step with expectations, given declines in stock markets and oil prices. AIMCo, which is a quarter the size, lost an estimated $2.1-billion on volatility investments. AIMCo CEO Kevin Uebelein said in a press release: “I certainly would never want to experience such an outcome from a strategy.”

CPPIB continues to use volatility-linked strategies as part of what it calls a “total portfolio approach.” AIMCo, on the other hand, decided to wind down these investments in April. In May, its board announced it has called in accounting firm KPMG LLP and former Ontario Teachers’ Pension Plan chief risk officer Barbara Zvan to fix what ails AIMCo.

Canada’s major pension plans are seen as world leaders, and CPPIB more than justified that status by putting up results that ensure predictable retirement income in unpredictable times. That strong performance also highlights significant issues at Alberta’s flagship fund manager.

Editor’s note: An earlier version of this story incorrectly stated that the Local Authorities Pension Plan’s assets declined by 13.4 per cent in the first three months of 2020 due to investment losses. In fact, the Alberta pension plan’s surplus fell by 13.4 per cent. This version has been corrected.

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