Accounting firm to review AIMCo's $2.1-billion investment loss

Outside reviewers will study how the Alberta Investment Management Corporation (AIMCo) lost $2.1 billion this year on a single investment strategy.

Corporation manages hundreds of thousands of Albertans' pension funds

the dome of the Alberta legislature
The Alberta Investment Management Corporation, a Crown corporation, will bring in external reviewers to look at how the organization lost $2.1 billion this year on a single investment strategy. (Juris Graney/CBC)

Outside reviewers will study how the Alberta Investment Management Corporation (AIMCo) lost $2.1 billion this year on a single investment strategy.

The government-owned investment corporation has called in accounting firm KPMG to conduct an independent review, AIMCo said in a statement published last week.

Barbara Zvan, a past chief risk manager at the Ontario Teachers' Pension Plan, will voluntarily provide advice to the board, the statement said.

"We deeply regret this result and are determined that the lessons from this experience will improve the corporation's management processes and prevent any similar occurrences," it said.

Among AIMCo's $119-billion portfolio is the $18-billion Alberta Heritage Savings Trust Fund and public sector pension plans holding the retirement savings of hundreds of thousands of Albertans.

The Alberta government has decreed that by the end of 2021, AIMCo must also manage investments for the $18-billion Alberta Teachers' Retirement Fund, which has more than 80,000 members.

Teacher Greg Meeker is a former board chair of the Alberta Teachers' Retirement Fund. (Submitted by Greg Meeker)

The Alberta Teachers' Association has called that move a "hijacking" done without consultation.

Objective look at a costly decision

David Long, a past chief investment officer at the Healthcare of Ontario Pension Plan, said on Monday the value of large pension plans can often fluctuate by several billion dollars.

Less common is to lose more than one per cent of a portfolio's value to a single investment strategy, said Long, who is now managing partner of Alignvest Investment Management in Toronto.

AIMCo lost about two per cent of the value of its assets with a volatility-based strategy when the coronavirus pandemic began to pummel the global economy.

A board has the responsibility to arrange an impartial and objective look at decisions made by a management team, traders, and portfolio managers in cases where top managers could have culpability for an error, Long said.

External reviewers will likely study whether AIMCo followed written investment policies and client direction, he said. How straightforward were internal communications? And why did people make decisions at certain times?

"When this amount of money gets lost, presumably unexpectedly, there has to be some level of accountability," he said.

The loss could also affect some of the bonuses AIMCo executives pocket for investment success.

AIMCo's 2018 annual report shows CEO Kevin Ueblein earned $3.4 million that year, nearly $2.9 million of which came from meeting short- and long-term performance objectives.

Teacher renews call for pause

Edmonton school principal Greg Meeker, who spent 12 years on the Alberta Teachers' Retirement Fund (ATRF) board and a decade as board chair, has watched AIMCo's performance closely.

He opposes the government's move to require AIMCo to invest teachers' pension money and said the recent losses should prompt the government to hit pause.

Calling in external consultants to discuss risk strategies should happen before investment decisions are made, not as an "autopsy," Meeker said on Monday.

"This might be the biggest case of shutting the door after the horse has departed," he said.

He said the results of the review should be released publicly and to pension fund managers, which include the Local Authorities Pension Plan, Management Employees Pension Plan and Public Service Pension Plan.

He wants to know how much top executives at AIMCo knew about front-line investment decisions and how those choices aligned with managers' instructions on risk tolerance.

Zvan is "tremendously qualified" and should have good insight for AIMCo, Meeker said. However, he's concerned that her voluntary role may limit the weight AIMCo gives to her advice.

AIMCo declined an interview request on Monday.

The board's statement said the review and any "resulting process enhancements" will be shared with clients and its shareholder — the provincial government — by mid June.