Calgary

Alberta public pension manager AIMCo says $2.1B lost on volatility-based strategy

The Alberta Investment Management Corporation (AIMCo) — the province's government-owned pension management fund — confirmed Thursday in a letter from the pension manager's CEO that losses from a bet on market volatility have led to a loss of $2.1 billion.

Board of directors has launched a review of the situation, AIMCo CEO says

Crown corporation AIMCo has lost approximately $2.1-billion on a volatility-related investment strategy, the CEO says. (Juris Graney/CBC)

The Alberta Investment Management Corporation (AIMCo) — the province's government-owned pension management fund — confirmed Thursday in a letter from the pension manager's CEO that losses from a bet on market volatility have led to a loss of $2.1 billion.

"This occurred because the losses that quickly accrued as market volatility dramatically increased and remained elevated were not able to be offset by the gains that would normally be realized as volatility returned to more typical levels," said CEO Kevin Uebelein in a release.

"Markets behaved in a manner never-before-seen and the result was a very unfortunate loss."

Last week, Institutional Investor, a trade publication based in New York that follows pension funds, first reported that AIMCo had lost more than $4 billion through the investment strategy. 

Though the actual losses are projected to be less than that figure — actual numbers will not be confirmed until the strategy is completely finished in mid-June — Uebelein said such losses were "wholly unsatisfactory."

"As an independent investment manager, AIMCo takes full responsibility for the investment losses incurred by this strategy," Uebelein said. 

"Over the past few weeks, we have focused on implementing measures to minimize the potential losses from this strategy and across our entire portfolio, while honouring our commitment that our clients remain fully informed of our results."

At an April 22 press conference, Premier Jason Kenney said AIMCo's investment losses were 'a fraction' of other stock market dips seen around the world amidst the COVID-19 pandemic. (Art Raham/CBC)

AIMCo manages a portfolio of roughly $110 billion, representing hundreds of thousands of Albertans' pensions and investments for the Alberta Heritage Trust Fund, Alberta Health Services and the Local Authorities Pension Plan (LAPP).

Last year, the Alberta government announced that public sector employee pensions would be transferred to the Crown corporation for management. 

That move has been met with heavy criticism from teachers, saying they were not consulted in the move, which would see roughly $18 billion moved from the Alberta Teachers' Retirement Fund to AIMCo by the end of 2021. 

Alberta Teachers' Association president Jason Schilling said the recent losses from AIMCo reiterate why teachers were concerned about transferring those funds to begin with.

"[With the ATRF], we have a say when it comes to these sorts of things," Schilling said. "When our asset management was moved to AIMCo, we would no longer have that say. That's why it's really concerning to teachers.

"To read the news of this loss by AIMCo last week, it's very concerning."

The board of directors at AIMCo has launched a review of the situation, Uebelein said.

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