As recently as two years ago, Alberta Premier Danielle Smith could have justified cleaning house at the province’s $169-billion asset manager.
The Alberta Investment Management Corp. posted a loss in 2022 and long-term performance lagged. Public service pension plans forced to commit savings to AIMCo sued the fund manager for $1.3-billion. And a newly recruited executive team’s turnaround plan had yet to prove its merits.
But AIMCo’s problems were history. Performance is now beating benchmarks, while costs have stayed in line with those of its peers. Chief executive officer Evan Siddall and a refreshed board of directors were taking care of business.
Last Thursday, Alberta’s government no longer had a reason to sack anyone. Ms. Smith’s only justification in dismissing the entire AIMCo leadership team – all 10 board members, Mr. Siddall and three other executives – is to clear the path for increased government control of investments at the country’s sixth largest pension plan.
The Premier is poised to raid the cookie jar. There’s a very real possibility the money funding retirement for thousands of Albertans will soon be invested in the United Conservative Party’s pet projects.
Increased political influence at AIMCo promises to be a disaster for Alberta retirees and a setback for what’s known around the world as the Canadian model: capital pools set up to deliver on the promise of a reliable pension.
In coming weeks, Ms. Smith will name a new AIMCo board and executive team. Interim chief executive officer Ray Gilmour is a career bureaucrat with zero asset management experience – he’s a placeholder, at best. If the Premier stacks the deck with UCP lackeys, who in turn advocate an Alberta-first investment mandate, the true purpose for last Thursday’s purge will be clear.
Conservative provincial politicians launched AIMCo in 2008 with a strategy to free retirees from the roller-coaster ride that is the oil patch. Alberta’s economy, while dynamic, is linked to fossil fuels and will remain that way for the foreseeable future. The oil and gas industry is cyclical but faces an existential threat from climate change.
Ms. Smith’s predecessors could have burdened AIMCo with a dual mandate of public funds such as the Caisse de dépôt et placement du Québec – set up to both invest prudently and contribute to the province’s economic development. They made a wiser choice.
AIMCo has always followed the global mandate adopted by the country’s other large pension funds – known globally as the Maple Eight – and Norway’s massive, oil-fuelled sovereign wealth fund. The Edmonton-based fund focused on earning the best possible risk-adjusted returns for Albertans. That remains the smart strategy. AIMCo’s approach offsets the biggest risk facing the province’s finances: a downturn in the oil patch.
If Ms. Smith’s UCP puts a finger on the AIMCo scale in favour of investments in Alberta, they are tying their citizens’ future retirement income to fossil fuels.
Since becoming Premier in 2022, Ms. Smith has taken a ready-fire-aim approach on a series of economic decisions. The UCP’s moratorium on renewable power development – announced without consultation in August, 2023 – triggered cancellation or delays on 95 wind and solar projects. The decision cost Alberta its leadership in the sector and enough green electricity to power every home in the province, according to the Pembina Institute.
A year ago, Ms. Smith made a bid to claim 53 per cent of savings in the Canada Pension Plan – a $344-billion cash grab based on made-in-Alberta math. The move threatens the health of a fund that provides critical retirement income for many Canadians. Trashing leadership at AIMCo, on dubious allegations that performance fell short and costs soared, fits the Premier’s pattern of dramatic actions based on faulty data.
If Ms. Smith wanted to revisit AIMCo’s mandate and consider an approach similar to Quebec’s Caisse, an approach articulately argued by fund managers such as Letko, Brosseau & Associates Inc., she could have done so with the previous board and executive team. The government’s decision to walk the entire leadership team out the door signals the UCP has a far more aggressive agenda for one of the country’s largest capital pools.
AIMCo invests for a work force that includes Alberta police officers, nurses and university professors. The only debate in the province should be what’s in the best interest of those clients. The answer to that question is stable leadership and a globally-focused investment strategy.