Canadian public pension manager AIMCo reportedly takes major hit to investments

The Alberta Investment Management Corporation has reportedly taken a big hit due to the impacts of COVID-19 and the drastic drop to oil prices

The Alberta Investment Management Corporation — Alberta’s (Canada) government-owned pension management fund — has reportedly taken a major hit due to the impacts of COVID-19 and the drastic drop to oil prices.

The Globe and Mail reported Tuesday evening that sources familiar with the situation say AIMCo has lost more than £3 billion ($4 billion) through a volatility-based investment strategy.

AIMCo has a portfolio of about £97 billion ($119 billion), which represents hundreds of thousands of Albertans' pensions and accounts like the province's Heritage Savings Trust Fund.

Dénes Németh, AIMCo's director of corporate communication, said the pension manager does not comment on the performance of active investment strategies other than to its clients.

The level of volatility that markets experienced in March 2020, the result of the COVID-19 pandemic, during which volatility rose faster, and on a more sustained basis than at any other time in history, is exceptional, he said.

AIMCo acknowledges that it is not immune to the challenges, unique as they may be, that institutional investors around the world have experienced, he said.

AIMCo's portfolio is broadly diversified, he said, adding that it's well positioned in the long-term.

Németh said AIMCo has been in frequent contact with investors to discuss the impact to portfolios relating to the current market conditions.

In fall 2019, public sector employees voiced concerns about the future of their pension plans after the Alberta government introduced legislation to lock in pension assets from all public sector plans under AIMCo's management.

Protests erupted, as it was announced roughly £15 billion ($18 billion) in assets from the Alberta Teachers' Retirement Fund (ATRF) would be moved to AIMCo, and the new legislation prohibited any public sector plan from withdrawing. That transition has not yet been completed.

In February of this year, the Alberta Federation of Labour voiced concerns that the pension manager was being used to  prop up the province's struggling fossil fuels industry at a time when many large investment funds have moved away from the sector.

Matt Wolf, the premier's executive director of issues management, tweeted Tuesday evening that AIMCo operates independently of government.

"From what I understand, 'volatility-based investment program' began well before the UCP (not that it was politically directed in any event),'" he wrote.

AIMCo announced its 2019 results earlier this month, and said its £9.34-billion ($11.5-billion) net investment income hadn't met client expectations for the year, as the return was 0.5 per cent below its benchmark.

It also cautioned of the harder times ahead.

While 2019 held its own challenges, 2020 is unparalleled with the global economic impact of COVID-19 and an oil price war causing virtually all asset values to be significantly repriced and investment markets to enter a period of sudden and unprecedented volatility, the April 8 press release read.

Our team is responding decisively in an effort to protect our clients' liquidity and assets in the near- and medium-term, while still identifying longer-term investment opportunities that will come out of these challenging market circumstances, CEO Kevin Uebelein said in the release.

We know the impacts to their portfolios during these times of market uncertainty will be significant, and we are committed to accountability and full transparency to our clients as we navigate these conditions together, he said.