By Muskan Arora
In response to the Alberta Finance Minister Nate Horner slashing the entire board and CEO of Alberta Investment Management Corporation (AIMCo), the former interim chair of the system, Kenneth Kroner challenges the data and the government of a faulty narrative.
While the government has the power to "reset" the board, the narrative around costs being out of control will make things difficult for the upcoming board and management team, stated Kroner, in his letter to the minister.
The government will replace the board within 30 days, and has appointed Ray Gilmour, Alberta’s top public servant as interim CEO.
Nate Horner, the province’s treasury board president and
finance minister will serve as both director and chair until a new one is appointed.
Naturally, the question arises: what are the real intentions of the government to take this drastic step last week ousting the AIMCo’s CEO Evan
Siddall, along with board members and appointed a bureaucrat and politician to
lead the pension plan until new leadership is hired?
The reason for intervention was a hike in the pension plan’s
operating costs that did not correspond with the returns. From 2019 to 2023,
the government noted the system’s third-party management fees increased by 96%,
the number of employees increased by 29%, and salary wage and benefits hiked by
71.4%, despite an average annualized return of 7.62%.
While these costs increased, the internally managed funds declined by 18%, stated the government in a press release.
Click Here for More Information
“If you’re going to see costs like this, I think you would expect them to hit their benchmark,” said Nate Horner, Alberta Finance Minister while speaking with the media, as per CBC.
In 2023, as well, AIMCo underperformed its benchmark at 8.7%
as the pension plan returned 6.9%. The Alberta government has an obligation to
monitor the public pension plan, and there might be more details to the plan’s operational
problems than disclosed.
The annual returns of two-, three-, four-, and five-year returns
at 1.6%, 5.8%, 5%, 6.1% all outperformed its benchmark at 1.5%, 3.6%, 4.7% and
5.9%.
Despite the annual return slightly lagging behind its peers,
the public pension plan is still in line with the recently reported annual
returns for British Columbia Investment Management Corp, at 7.5%, for the fiscal
year ending March 31. Both PSP and
Caisse de dépôt et placement du Québec returned 7.2% for its one-year period. However,
AIMCo is well above Ontario Teachers’ Pension Plan’s return at 1.9% for the
year ended December 31.
This has led to a backlash towards Alberta’s ruling United
Conservative Party.
While interacting with other publications, Keith Ambachtsheer,
director emeritus of International Centre for Pension Management claims that
the government is “making it up” as the public plan’s official reports doesn’t
project poor performance.
While speculations by other publications claim that the government
is interjecting to take charge of AIMCO’s assets for its own political purposes.
This strategic move clears the path for the government to take control of the
investments of the country’s sixth largest plan.
It still remains unclear how the interference of the
government would change the extensive private markets investments including
private equity which is led by Peter Teti.
Through its PE portfolio, the system focuses on backing
large and mid-market buyout funds and co-investing in deals with them and
others.
AIMCo has recently undergone a few internal changes. In late
September, CIO Marlebe Puffer departed. At the same time, the pension plan
appointed Justin Lord to the newly carved role of global head of public markets
and also appointed David Scudellari as senior executive managing director and
global head of private assets and strategic partnerships.
