Alberta Investment Management Corporation

Alberta Investment Management Corporation

Type	Crown Corporation
Industry	Investment Management
Founded	January 1, 2008
Headquarters	Edmonton, Alberta, Canada
Key people	Kevin Uebelein CEO Mac Van Wielingen, Chair
Total assets	$75 billion CAD (2014)
Number of employees	350
Website	www.aimco.alberta.ca

Alberta Investment Management Corporation (AIMCo) is one of Canada's largest and most diversified institutional investment fund managers, with an investment portfolio of approximately $75 billion. Headquartered in Edmonton, Alberta, AIMCo manages the assets of 27 clients, a diverse set of public sector pensions, endowments and government funds. Alberta Investment Management Corporation is responsible for the management of the assets of the Alberta Heritage Savings Trust Fund (AHSTF), which was created in 1976 by Premier Peter Lougheed by the Alberta Heritage Savings Trust Fund Act with three objectives, "to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans. Clients include Endowment Funds, Pension Plans, Government Funds and Special Purpose Funds.

History

Legislation creating AIMCo was passed by the Alberta legislature on March 20, 2007, and AIMCo became a crown corporation on January 1, 2008. Prior to becoming a Crown corporation in 2008, the corporation's assets were managed by a division of Alberta Finance.

"At March 31, 2009 assets under its administration totaled approximately $69.0 billion (2008 – $75.7 billion) at market value." In its 2009 Annual Report AIMCo published its total fund return was -10.1% for the year ending March 31, 2009.

By 2012 AIMCo posted a 22.8% return in real estate holdings and a 17% return in long bonds portfolio. In 2012 AIMCo was managing 12 government funds, 8 pensions, and 6 endowments that represented $7 billion in assets.

Trends

AIMCo is one of several "pooled investment portfolios in Canada that allow for "client-controlled asset allocation for multiple public-sector pension plans and investment funds. Through pooled asset management, these entities achieve sufficient scale to produce significant cost savings through internal investment management and access to alternative asset classes." Through funds like these "Canada is emerging as a world-wide leader in successfully adapting the advantages of large funds to the public sector." These are "arm’s-length investment management entities with sufficient scale, independent boards and internal investment management, remunerated at rates competitive with the private sector."

Organization

Employees

When AIMCo was created on January 1, 2008, it had a staff of 137. By March 31, 2014 the number of employees has grown to 350, split evenly between investments and operations.

Operating Costs

AIMCo operates on a cost-recovery basis. Total expenses for the year ended March 31, 2014 were $445 million, equating to 46 cents per $100 of invested assets. AIMCo is increasing internal investments in people and technology to achieve greater cost-efficiencies over the next three years. It expects to internalize the management of an additional $8 billion of assets ($5 billion in equities and $3 billion in inflation sensitive). The net result is a projected savings of $45 million in operating costs every year, starting in 2012. These cost savings may then be passed along to the Clients on whose behalf funds are managed.

Governance

AIMCo was established as a crown corporation by the Province of Alberta to provide independent, arms length investment management services to designated pension funds and provincial public sector bodies and funds, with strong accountability for its investment decisions.

According to AIMCo's website,

"The Board of Directors is responsible for overseeing management of the business and affairs of AIMCo. As part of this mandate, the Board sets the strategic direction of the Corporation and oversees the development and implementation of policies and procedures that govern the conduct of AIMCo's business."

— AIMC0 website

According to AIMCo's 2010/2011 Annual report,

"In order to be appointed to the Board, a Director must have demonstrated experience in investment management, finance, law or served as an executive with a large, publicly traded company. All Directors are independent of management." Directors are required by statute to act honestly and in good faith with a view to the best interests of the Corporation and are required to exercise the care, diligence and skill that a reasonable and prudent person would exercise in comparable circumstances. The Board of Directors meets six times every year with meetings scheduled one year in advance. Additional meetings are arranged as required."

— AIMCo Annual Report

Clients

AIMCo manages funds for a diverse group of Alberta public sector clients. It creates portfolios that reflect the clients’ chosen risk and return profiles. The majority of AIMCo’s assets under management come from Alberta public sector pension plans and provincial endowment funds. Collectively known as AIMCo’s Balanced Funds, these clients are primarily invested in equities, bonds and inflation sensitive products. Other assets, managed for the Government of Alberta, are generally invested in money market and short-term bonds.

Alberta Heritage Savings Trust Fund

Main article: Alberta Heritage Savings Trust Fund

The Alberta Heritage Savings Trust Fund was created in 1976 by the Alberta Heritage Savings Trust Fund Act with three objectives: "to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans.

Initially, the fund received 30 per cent of Alberta's non-renewable resource royalties. During the early 1980s, the fund made loans to other provincial governments in Canada. Later the fund's money was used for capital infrastructure projects.

Ralph Klein, a very popular Alberta Premier from 1992 through 2007, used the Alberta Heritage Savings Trust Fund to fund special projects to encourage economic diversification. For example, Klein used the Fund for a $264 million loan to Alberta-Pacific Forest Industries Inc. (Al-Pac) in December 1990. Al-Pac began construction of "North America’s newest and largest pulp mill" by Alberta-Pacific Forest Industries Inc. (Al-Pac). It was the "first in a new generation of pulp mills constructed to meet higher environmental standards put in place in the late 1980s." This loan was eventually forgiven. During the mid-1990s, public opinion turned against allowing governments to dip into the Heritage fund to fund special projects, and instead all income earned each year began to be withdrawn from the fund and added to general revenues.

As of 2012, the fund is invested in stocks, bonds, real estate and other ventures, with the aim of generating revenue for the province.

Reports by the Canadian Centre for Policy Alternatives and the Fraser Institute concluded that Alberta should be saving more of its non-renewable resource revenues (NRR). Since 1980 the NRR in Alberta, has generated almost $190 billion, but the value of the Heritage Fund was only $17.3 billion in 2014. After 1987 NRR was no longer added to the Heritage Fund. The Fraser Institute report compared the Alberta Heritage Fund to Norway and Alaska's NRR funds and argued that Alberta's was significantly "smaller than others because of its relative under-funding and chronic withdrawals of most income from the fund." Alaska for example continued to deposit 25 percent of its NRR from 1982- 2011 and Norway contributed 100 percent. If Alberta had followed the Alaskan formula, by 2011 the Heritage Fund would have had $42.4 billion instead of $9.1 billion. By the Norway rules Alberta would have had $121.9 billion by 2011.

Pension Plans

AIMCo manages the investment assets on behalf of the following pension plans on behalf of its sole shareholder, the Alberta Minister of Finance:

• Local Authorities Pension Plan (LAPP) – this plan was established in 1962 for employees of local authorities in Alberta including cities, towns, villages, municipal districts, hospitals, colleges, school boards and many other public service organizations. LAPP is the largest public sector pension plan in the province.
• Public Service Pension Plan (PSPP) – established in 1947, this plan is for employees of the Alberta government and other public service organizations.
• Special Forces Pension Plan (SFPP) – established in 1979 for police officers, police chiefs, and deputy chiefs employed by local authorities in Alberta.
• Management Employees Pension Plan (MEPP) – the foundations of this plan were established in 1972. Then known as the Public Service Management Pension Plan for management employees of the Alberta government and other public sector organizations. In 1994 the Plan changed and was renamed MEPP.
• Provincial Judges and Masters in Chambers Pension Plan (Registered) and Supplementary Retirement Plan for Provincial Judges and Masters in Chambers (Unregistered); collectively known as the “Judges Pension Plan” – the registered part of the Plan provides benefits up to the maximum allowed for registered pension plans under federal tax rules. The unregistered part of the Plan provides benefits in excess of those limits. Established in 2001 with provisions retroactive to April 1, 1998, the Judges Pension Plan replaced the Provincial Judges and Masters in Chambers Pension Plan established September 1, 1988. Prior to that, judges and masters in chambers contributed to the Public Service Management Pension Plan.
• Supplementary Retirement Plan for Public Service Managers – established on July 1, 1999, this plan provides additional pension benefits to public service managers of designated employers who participate in the Management Employees Pension Plan (MEPP) and whose annual salary exceeds the yearly maximum pensionable earnings limit under Canada’s Income Tax Act.

External links

• Official website
• Heritage Fund