Alberta's Heritage fund regains some value after big spring hit

The value of Alberta’s rainy day fund has begun to rebound after being hammered by COVID-19 pandemic shutdowns and risky investment decisions.

Alberta's largest public-sector pension plan also recovering from investment volatility

Alberta's Heritage fund has begun to recover some of the losses incurred earlier this year when markets took a dive and AIMCo ran into trouble with an investment strategy. (Josee St-Onge/ CBC)

The value of Alberta's rainy day fund has begun to rebound after being hammered by COVID-19 pandemic shutdowns and risky investment decisions.

As of June 30, Alberta's Heritage Savings Trust Fund was worth $17.2 billion, up from an eight-year low of $16.3 billion at the end of March.

Dale MacMaster, chief investment officer for the Alberta Investment Management Corporation (AIMCo), told a legislative committee Tuesday he is "exuberant" the fund has begun to bounce back.

"I think that's remarkable for Albertans," MacMaster said. "And believe me, we come into work every single day with the Albertan in mind. And we're very proud to be delivering the goods for them."

He said he expects the gains to continue throughout the year, as economic challenges present investment opportunities.

AIMCo manages 31 funds, including the Heritage fund and other government investments, along with three huge public sector pension plans for nearly 375,000 Albertans. The corporation came under fire this spring when it lost $2.1 billion on a volatility based investment strategy.

The missteps cost the Heritage fund $411 million alone.

AIMCo's troubles have since been the subject of internal soul searching, external reviews and public apologies pledging to do better.

The value of Alberta's largest public sector pension plan, the Local Authorities Pension Plan (LAPP) also dropped by 6.5 per cent between January and March 2020. The plan, which has 275,000 members and is managed by AIMCo, said market dives and AIMCo's problematic choices were to blame. Municipal employees, health-care workers and other public servants have LAPP pensions.

However, between April and June this year the value of the LAPP fund jumped back up 5.4 per cent to $49.75 billion, its quarterly results show.

President and CEO Christopher Brown is less confident than MacMaster the rebound will continue.

"We know full well there's a lot of uncertainty still in the markets, and we don't want to count our chickens before they hatch," Brown said in an interview. "We'll have to wait and see how the remainder of the year plays out. Obviously, we're all still grappling with both the longer and shorter term impacts of the pandemic."

Although by August, the value of the plan had nearly reached its 2019 value, Brown is closely watching civil unrest in the U.S. and the impending presidential election for their influences on markets.

Opposition says Heritage fund report lacks transparency

At the Heritage committee meeting, Opposition members reiterated their concerns about AIMCo's management of public investments and said the government should stop its plan to create a provincial pension plan for AIMCo to manage.

NDP MLAs accused the government and finance ministry of excluding data that had been included in previous Heritage fund quarterly reports and burying the fund's rate of investment return at the end of the report. The numbers show AIMCo has not met the government's five-year goal of generating a seven-per-cent return on investment.

NDP finance critic Shannon Phillips criticized the millions of dollars in performance-based bonus pay AIMCo executives earned while their investments underperformed.

NDP finance critic Shannon Phillips says she has concerns about AIMCo's performance and the government's reporting on the performance of the Heritage Savings Trust Fund. (Legislative Assembly of Alberta)

"The Heritage fund is money that belongs to Albertans," Phillips said in an interview. "It doesn't belong to a bureaucrat in the finance department. It doesn't belong to a high-flying trader at AIMCo. It belongs to ordinary people who worked hard for that money."

Finance deputy minister Athana Mentzelopoulos said ministry employees were reluctant to report conclusions about the fund, given the unprecedented volatility of the global economy.

NDP labour and immigration critic Christina Gray said the government should abandon its idea to have AIMCo manage investments for a potential new provincial pension plan.

Premier Jason Kenney has pledged to hold a referendum next year on pulling Alberta out of the Canada Pension Plan and creating an Alberta pension plan. A government-appointed panel studying how Alberta could assert its position within confederation also recommended exploring a provincial pension plan.

Last week, the government posted a request for proposals for a contractor to prepare a detailed analysis of the potential cost, benefits, risks and structure of a provincial pension plan.

The analysis is expected to yield estimates about the contribution rates required for a pension plan, what assets and liabilities Alberta would receive from the CPP, how portable an Alberta pension would be for people who move provinces and how future demographics and economic conditions might affect a plan, among other data.

The contractor is expected to report back its findings in early 2021. A government spokesperson would not provide an estimated cost for the study.

Gray said it's unnecessary, as the government already prepared an internal analysis last year, which flagged some potential risks of taking over a public pension plan.