Reported $4B loss by Alberta pension manager prompts calls for change

Alberta public sector pension plan managers are reassuring workers and retirees their savings are secure after reports a provincial pension manager has lost billions in risky investments.

A reported $4-billion loss by the Alberta Investment Management Corporation (AIMCo) has also reinvigorated calls for the Alberta government to stop forcing public sector pension plans to use AIMCo as an investment manager.

"That's a problem for my board and the groups that we represent," said Howard Burns, chair of the Special Forces Pension Plan's sponsor board. The plan has about 6,500 current and retired municipal police officers enrolled.

"We have no mechanism to deal with performance that's subpar and there's no avenue for us to get out."

The Globe and Mail reported Tuesday that AIMCo has lost around $4 billion of the roughly $110 billion it managesby using a strategy that relied onlittle volatility in global markets. The story was first reported by Institutional Investor, a trade publication based in New York that follows pension funds.

In the interim, the coronavirus pandemic triggered an oil price war and likely recession that sent markets tumbling.

Although he didn't confirm the value, Alberta Premier Jason Kenney said Wednesday the scale of AIMCo's loss was "a fraction of what we've seen in terms of the financial markets over the last several weeks."

AIMCo spokesperson Denes Nemeth said Wednesday the corporation won't comment on the performance of any investments, except to its clients or in routine public disclosure statements.

Pension plans cushioned for long-term survival

The Crown corporation manages investments for the Alberta Heritage Trust Fund, Alberta Health Services, the Workers Compensation Board and other public entities. Three major public-sector pension plans with a joint 350,000 members are legally required to have AIMCo manage their investments.

The largest of them is the Local Authorities Pension Plan (LAPP), recently valued at $50 billion and with 275,000 members. Health-care workers and municipal employees are among the members enrolled.

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Chris Brown, LAPP's president and CEO, said in a Wednesday news release the pension plan is in a strong financial position and "not threatened by short-term market fluctuations."

The Public Service Pension Plan, which has nearly 86,000 members who have worked for the provincial government or a post-secondary institution, also issued a statement saying AIMCo's investment choices would not affect pension benefits.

Special Forces Pension Plan (SFPP) leaders learned earlier this month that money invested by AIMCo had taken a dive, CEO Liz Doughty said in a Wednesday interview.

The police pension is secure and funded, she said. They've since discussed their level of risk tolerance with AIMCo investors, she said.

"The investments have taken some hits that are unnecessary," Doughty said.

Cushions built into the plan should help it weather the losses, she said. The plan lost about 15 per cent of its value, and half of that has since been earned back with changes in strategy, she said.

Investment of teachers' pensions moving to AIMCo

News of the loss prodded renewed calls for the government to reverse decisions it made last year locking public sector pension plans into using AIMCo to invest their money.

Burns, of SFPP, says the United Conservative Party's Bill 22 has forced the pension plan into a "troubled marriage" with AIMCo it cannot escape.

He questioned why the provincial government should have investment control over a pension plan funded solely by police officers and municipalities.

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Requiring pension plans to invest with AIMCo has created a monopoly and gives the corporation little incentive to improve its performance for clients, Burns said.

Curtis Hoople, president of the Alberta Federation of Police Associations, saidWednesday he wrote to Finance Minister Travis Toewsin January, and willwrite the minister again, asking him to give police officers the freedom to choose who manages their pension investment.

Alberta Teachers' Association president Jason Schilling repeated calls Wednesday for the government to reverse a move seizing investment control of the Alberta Teachers' Retirement Fund.

Bill 22 requires thefund to hand over investment management of 82,000 members' pensions by the end of 2021. Teachers have decried the move, saying it was done without consultation and against their wishes.

Kenney said Wednesday the transfer of control eliminates "unnecessary duplication" of work and should save taxpayers $20 million a year in investment management fees.

The premier also said he's awaiting a report back from his "fair deal" panel, which was asked to examine policies bolstering Alberta's self-sufficiency, including the concept of an Alberta-run public retirement income plan.

Given Alberta's younger demographics, it's reasonable to consider whether running a provincial alternative to the Canada Pension Plan could more directly benefit Albertans, he said.

The "fair deal" panelwas supposed to submit a report to the premier by March 31, then the deadline was extended until April 21. As of Wednesday, he had not received the report.

Opposition Leader Rachel Notley said Wednesday AIMCo's problems signal that government should not be handing them more funds to invest.

"Let us not multiply the mistakes by forcing Albertans to put money into a plan that can be demonstratively better run elsewhere," Notley said.