OPINION | Kenney ignoring teachers' pension fears after AIMCo's $4-billion 'blunder'
ATA worried about pensions' future under AIMCo
Premier Jason Kenney is fluent in both of Canada's official languages. Yet he can't seem to communicate with Alberta's teachers.
That became evident this week when Kenney and the Alberta Teachers' Association (ATA) butted heads yet again over the government's investment arm, the Alberta Investment Management Corporation, commonly known as AIMCo.
The government is forcing the teachers' $18-billion pension fund, the aptly named Alberta Teachers' Retirement Fund (ATRF), to use AIMCo as its sole investment manager rather than invest with any manager it chooses. AIMCo manages $119 billion in assets, including the pension funds for 375,000 public sector workers, as well as the Alberta Heritage Savings Fund.
Kenney has said rolling the teachers' pension fund under AIMCo's management will save teachers $20 million a year in premiums, increase the scale of AIMCo's portfolio "to invest prudently in a larger class of assets," and generate better returns for the fund.
The ATA is not happy. It hasn't been happy about this since last fall when the government passed Bill 22 forcing the ATRF funds under the AIMCo umbrella.
AIMCo lost $4 billion
The ATA has a long list of reasons to stay clear of AIMCo: the ATRF has been doing a perfectly good job managing the fund for the past 80 years; the Kenney government unilaterally made the decision without first asking the 46,000-member teachers' association what it thought; and the ATA is suspicious of pretty much everything the Kenney government does.
And this week, another reason: AIMCo reportedly lost a whopping $4 billion in the pandemic-hammered stock markets. The story was first reported in the New York-based magazine, Institutional Investor, that called the AIMCo investment strategy a "blunder."
The magazine pointed out that although "Canada boasts some of the world's most sophisticated and best-performing public investment funds ... AIMCo is not among that top tier, experts and data suggest."
I don't think anybody at AIMCo will be printing out the Institutional Investor article to send home to mom.
"For example, the Ontario Teachers' Pension Plan delivered 9.8 per cent annualized over the last decade, whereas AIMCo gained 8.2 per cent — a gap of more than 1.5 percentage points per year," said the article. "Even within its own province, AIMCo has trailed the smaller Alberta Teachers' Retirement Fund."
Teachers call for repeal of Bill 22
Fortunately for the teachers' fund, its $18 billion in assets have not yet been placed into AIMCo's portfolio. That transition is still underway as both sides work out details. But the ATA, rattled by the AIMCo blunder, wants Kenney to reverse course.
"Teachers invest their own money into their pension plan," said ATA president Jason Schilling. "Teachers were not consulted on the takeover and this story further validates our concerns. I am calling on the Government of Alberta to finally listen to teachers and stop the takeover by repealing Bill 22."
When I asked Kenney during a news conference Wednesday if he'll listen to Schilling or transfer control to AIMCo, Kenney seized on the word "control" and ducked down a rabbit hole.
"No, we were never going to transfer control to AIMCo. The premise of your question is completely unfactual," he said, setting us up for a Kenneysian lecture.
Kenney said the ATRF board will continue to be the governing authority and AIMCo "would simply act as the investment agency for the board as it does for every other public pension fund in Alberta."
That sounds innocent enough, except for a couple of glaring issues.
For one, those other public pension funds are handcuffed to AIMCo. They don't have the freedom to take their money and find a manager that doesn't make billion-dollar blunders.
As for teachers, Schilling said the final decision on investing their money will be made by AIMCo, not the teachers' retirement fund board.
"What's being transferred from the Alberta Teachers' Retirement Fund to AIMCo is the control of the investment management," said Schilling. "There will still be an ATRF board. The board can give suggestions to AIMCo, in terms of investment management strategies, but they don't always have to follow it. And this is the problem teachers have with this transfer."
NDP happily joins the fray
Kenney did point out correctly that the teachers' pension benefits are protected under law, even if the pension fund should take a financial hit. But Schilling said if AIMCo lost, say, $4 billion of the teachers' fund, teachers still on the job would likely see their pension contributions increase to help make up the deficit.
(We don't know yet if the ATRF has lost money during the pandemic crisis. A statement on its webpage said, "while we can't avoid losses when the market falls as it did in March, we structure the portfolio to avoid making a bad situation worse when it does happen."
A Globe and Mail article this week said while the average Canadian pension plan lost 8.7 per cent of its value in the first three months of this year, "AIMCo is expected to be down far more than this.")
The NDP, not surprisingly, has happily jumped into this controversy.
New Democrat MLA Christina Gray has tabled a private member's bill that would reverse Bill 22 as well as give other public pension funds under AIMCo's umbrella the freedom to find other investment managers, if they so choose.
Bill 203 is purely symbolic, of course, in the face of the United Conservative Party's majority government.
Kenney seems not to understand the teachers' concerns. Or, perhaps more accurately, he understands perfectly well what they're saying but has turned a deaf ear.