Thursday, November 14, 2024

AIMCo expansion, Alberta’s investment focus were sources of tension before purge, sources say

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The decision by Alberta Investment Management Corp. (AIMCo) to launch operations abroad as it chased higher returns and the extent to which the investment manager should invest in Alberta were sources of tension with the provincial government in the months leading up to Alberta’s stunning decision this week to remove AIMCo’s entire board of directors and chief executive, according to several people familiar with what transpired.

In a news release Thursday, the Alberta government said the “reset” at AIMCo was driven by rising costs at the Crown corporation, including third-party management fees and salaries and benefits that were not matched by a corresponding return on investment.

But three pension veterans familiar with events said there was more going on behind the scenes than scrutiny of costs.

One of them described the stated rationale of costs as “smoke and mirrors” for a deeper agenda to reshape AIMCo.

“Cost-cutting is not a big issue here,” said the source, who asked not be identified because of sensitivities around recent events. “This is a deeply political situation.”  

This is a deeply political situation

Another of the sources, all of whom spoke on condition of anonymity, pointed to efforts to expand investment capabilities by hiring expensive investment managers and opening offices in New York and Singapore this year and last as a point of tension.

But others said that was just one piece of the puzzle, and suggested the government is focused on driving investments in Alberta.

The shakeup at AIMCo comes as Alberta Premier Danielle Smith prepares to unveil her government’s plan to boost the size of the AIMCo-managed Heritage Savings Trust Fund, which, according to its website, “produces income to support government programs essential to Albertans.”

In February, Smith said she envisioned the fund, which was established in 1976 to collect a portion of Alberta’s non-renewable resource revenue to invest in projects that would improve life in Alberta and diversify the Alberta economy, to grow much larger by 2050 than the nearly $24 billion value it had June 30.

The Alberta government also announced plans last year to pull out of the Canada Pension Plan, and take its share of the giant fund with it, but that effort appears to have moved to the back burner. 

“We’ll be releasing our plan to grow the Heritage Savings Trust Fund to $250 billion by the end of the year, with a focus solely on getting the best returns for Albertans,” Justin Brattinga, senior press secretary at Alberta’s Ministry of Treasury Board and Finance, said Friday.

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