Alberta Investment Management Corporation

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Alberta Investment Management Corporation
Crown Corporation
Industry Investment management
Founded 1 January 2008; 9 years ago (2008-01-01)
Headquarters Edmonton, Alberta, Canada
Key people
Kevin Uebelein (CEO)[1]
Mac Van Wielingen
(Chairman)[2]
Total assets Increase C$90 billion (2014)[3]
Number of employees
350
Website aimco.alberta.ca

Alberta Investment Management Corporation (AIMCo) is one of Canada's largest and most diversified institutional investment fund managers, with an investment portfolio of approximately $90 billion. Headquartered in Edmonton, Alberta, AIMCo manages the assets of 31 clients, a diverse set of public sector pensions, endowments and government funds.

History[edit]

Legislation creating AIMCo was passed by the Alberta legislature on March 20, 2007,[4] and AIMCo became a crown corporation on January 1, 2008.[5] Prior to becoming a Crown corporation in 2008, the corporation's assets were managed by a division of Alberta Finance.

"At March 31, 2009 assets under its administration totaled approximately $69.0 billion (2008 – $75.7 billion) at market value."[6] In its 2009 Annual Report AIMCo published its total fund return was -10.1% for the year ending March 31, 2009.[6]:14

In 2015 AIMCo earned a 9.1% total fund net return on behalf of its clients.[7] By 2015 AIMCo was managing 4 endowment funds, 7 pension plans, 9 government funds, 8 specialty funds, and 2 other balanced funds.

Strategy[edit]

AIMCo is one of several "pooled investment portfolios" in Canada that allow for "client-controlled asset allocation for multiple public-sector pension plans and investment funds. Through pooled asset management, these entities achieve sufficient scale to produce significant cost savings through internal investment management and access to alternative asset classes." Through funds like these "Canada is emerging as a world-wide leader in successfully adapting the advantages of large funds to the public sector." These are "arm’s-length investment management entities with sufficient scale, independent boards and internal investment management, remunerated at rates competitive with the private sector."[8]

AIMCo’s focuses its investments across three broad categories, Equities, Illiquid Investments, and Fixed Income all employing varying strategies.

Equities[edit]

Equity holdings, which contain both public and private equity, total to 43% (2015) of AUM. The public equity portfolio maintains exposure to a diversifying set of common style factors, as well as stock selection and other idiosyncratic risk. By investing with both private funds and co-venture deals, AIMCo private equity focuses on business that generate stable free cash flow and are operated by strong management teams.

Illiquid Investments[edit]

Illiquid Investments, which constitute 22% of AUM, include long-term holdings in Real Estate, Infrastructure and Timberland. The long term Real Estate assets are the core strategy direct investments in office, retail, industrial and multi-unit residential properties located in major Canadian Centres. AIMCo’s Infrastructure investments match long duration real return asset characteristics with inflation indexed-pension liabilities. The Timberland assets are held to provide inflation hedging and a long-term duration match with client obligations.

Fixed Income[edit]

The Fixed Income portfolios are managed with the objective of capital preservation, liquidity, and risk-controlled return relative to benchmark. These asset classes make up 35% of AIMCo’s AUM.

Asset Mix (as of 2015)[edit]

Asset Class AUM (CDN) (billion) % of Total Fund
Equities 38.8 43
Fixed Income 19.8 22
Illiquid 31.6 35

Historical Performance[edit]

  • 2015 (Calendar Year Ending December 31, 2015): 9.1%[7]
  • 2014 (Calendar Year Ending December 31, 2014): 9.9%[9]
  • 2013 (Calendar Year Ending December 31, 2013): 12.5%[10]
  • 2012 (Calendar Year Ending December 31, 2012): 10.8%[11]
  • 2011-2012 (Fiscal Year Ending March 31, 2012): 7.9%[12]
  • 2010-2011 (Fiscal Year Ending March 31, 2011): 8.2%[13]
  • 2009-2010 (Fiscal Year Ending March 31, 2010): 12.0%[14]

Responsible Investing[edit]

AIMCo’s approach to Responsible Investment is governed by its fiduciary duty to clients and a long-term investment horizon. AIMCo seeks to maximize risk-adjusted returns by integrating environmental, social and governance (ESG)) factors into investment analysis across all asset classes. AIMCo’s Responsible Investment processes include:

  • Exercising proxy voting rights on behalf of AIMCo’s clients at annual general meetings of publicly traded companies globally to enhance shareholder value. Votes are guided through AIMCo’s Proxy Voting Guidelines, and take into account unique circumstances and markets.
  • Engaging with companies to effect positive change when possible and collaborate with like-minded investors to influence corporate behavior, rather than divesting of applicable holdings; an approach called “voice over exit”. Engagements are identified through ESG focus areas approved by AIMCo’s Responsible Investment Committee.
  • Being a signatory to the United Nations Principles for Responsible Investment (PRI), the Responsible Investment Association, the Canadian Coalition of Good Governance (CCGG) and several others.
  • Disclosing its Responsible Investment policies, guiding documents, activities and proxy voting record on its website.

Significant Transactions[edit]

Autopista Central[edit]

  • Acquired in 2011, this Chilean toll road was sold for ~$1.5 CAD billion in 2015 to Abertis Infraestructuras SA (Abertis).[15] This investment was the first AIMCo-only led private investment in the organization’s history. The active management and eventual monetization of this asset captured significant value add as it saw a positive return on investment.

Porterbrook[edit]

  • AIMCo alongside long-term infrastructure investors Allianz Capital Partners (ACP) and Hastings Fund Management (Hastings) purchased Porterbrook Rail Finance Limited (Porterbook) for an undisclosed amount.[16] This major rolling stock leasing UK company owns and manages a fleet of approximately 5,900 railway vehicles. AIMCo is still a major stakeholder in this company.

Grupo SAESA[edit]

  • In 2011, AIMCo, on behalf of its clients, acquired Morgan Stanley Infrastructure Partners 50% interest in the Chilean company Inversiones Grupo Saesa Limitada (Grupo SAESA).[17] This electricity transmission and distribution company is jointly owned by AIMCo and Ontario Teacher’s Pension Plan (OTPP).

London City Airport[edit]

  • AIMCo, on behalf of its clients, Ontario Municipal Employees Retirement System (OMERS), Ontario Teacher’s Pension Plan (OTPP), and Wren House Infrastructure Management Limited (Wren House) acquired the London City Airport in 2016.[18] This group, called the Consortium, committed to developing the existing and new airline relationship and routes, improving the airport’s customer service and generating opportunities for new and existing employees.

BBC Television Centre[edit]

  • In 2012, Stanhope, Mitsui Fudosan UK and AIMCo, on behalf of its clients, completed the purchased BBC Television Centre in West London. Construction began in summer of 2015 to develop homes, offices, hotels, retail and leisure facilities within this 13.7-acre area.[19]

Organization[edit]

Employees[edit]

When AIMCo was created on January 1, 2008, it had a staff of 137. By December 31, 2015 the number of employees has grown to 352, with 121 in Investment Management and Risk, 153 in Investment Operations, and 78 in Corporate Services.

Operating Costs[edit]

AIMCo operates on a cost-recovery basis. Total expenses for the year ended March 31, 2014 were $445 million, equating to 46 cents per $100 of invested assets.[20] AIMCo is increasing internal investments in people and technology to achieve greater cost-efficiencies over the next three years. It expects to internalize the management of an additional $8 billion of assets ($5 billion in equities and $3 billion in inflation sensitive). The net result is a projected savings of $45 million in operating costs every year, starting in 2012. These cost savings may then be passed along to the Clients on whose behalf funds are managed.[citation needed]

Governance[edit]

AIMCo was established as a crown corporation by the Province of Alberta to provide independent, arms length investment management services to designated pension funds and provincial public sector bodies and funds, with strong accountability for its investment decisions.

According to AIMCo's website,[21]

"The Board of Directors is responsible for overseeing management of the business and affairs of AIMCo. As part of this mandate, the Board sets the strategic direction of the Corporation and oversees the development and implementation of policies and procedures that govern the conduct of AIMCo's business."

— AIMCo website

According to the Alberta Investment Management Corporation Regulation[22]

"Individuals appointed to the board must have proven and demonstrable experience and expertise in investment management, finance, accounting or law or experience as an executive or a director in a senior publicly traded issuer."

— Alberta Investment Management Corporation Regulation, Section 5.

According to AIMCo's 2010/2011 Annual report,[23]:39

Directors are required by statute to act honestly and in good faith with a view to the best interests of the Corporation and are required to exercise the care, diligence and skill that a reasonable and prudent person would exercise in comparable circumstances. The Board of Directors meets six times every year with meetings scheduled one year in advance. Additional meetings are arranged as required."

— AIMCo Annual Report

Board of Directors[edit]

  • Mac H. Van Wielingen (Chair)
  • John T. Ferguson (Vice-Chair)
  • George F.J. Gosbee
  • Virginia Holmes
  • Harold A. Roozen
  • Andrea S. Rosen
  • Robert L. Vivian Jr.
  • Helen Kearns
  • Tom Woods
  • Ross Grieve
  • J Richard Bird

[24]

Clients[edit]

AIMCo manages funds for a diverse group of Alberta public sector clients. It creates portfolios that reflect the clients’ chosen risk and return profiles. The majority of AIMCo’s assets under management come from Alberta public sector pension plans and provincial endowment funds. Collectively known as AIMCo’s Balanced Funds, these clients are primarily invested in equities, bonds and inflation sensitive products. Other assets, managed for the Government of Alberta, are generally invested in money market and short-term bonds.

Alberta Heritage Savings Trust Fund[edit]

The Alberta Heritage Savings Trust Fund was created in 1976 by the Alberta Heritage Savings Trust Fund Act[25] with three objectives: "to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans.[26]

Initially, the fund received 30 per cent of Alberta's non-renewable resource royalties. During the early 1980s, the fund made loans to other provincial governments in Canada. Later the fund's money was used for capital infrastructure projects.[26]

To date, over $33 billion has been made available to fund Albertans’ priorities, such as health care, education, infrastructure and social programs. The Fund is managed with the goal of maximizing long-term real returns at a prudent level of risk. Under the Alberta Heritage Savings Trust Fund Act, all income, less the amount required for inflation proofing, is used as revenue by the government. The Heritage Fund is a member of the International Forum of Sovereign Wealth Funds and is therefore signed up to the Santiago Principles on best practice in managing sovereign wealth funds.[27] AIMCo works closely with Alberta Treasury Board and Finance to set long-term objectives for the Heritage Fund and implements these objectives through investments in a globally diversified mix of bonds, public and private equities, hedge funds, real estate and other real asset investments, such as infrastructure and timberland.

Pension Plans[edit]

AIMCo manages the investment assets on behalf of the following pension plans on behalf of its sole shareholder, the Alberta Minister of Finance:

  • Local Authorities Pension Plan (LAPP)[28] – The Local Authorities Pension Plan (LAPP) is a contributory defined benefit pension plan that currently enjoys strong net positive cash flows. As the largest pension plan in Alberta, LAPP remains focused on keeping the Plan sustainable to pay future benefits for its members. LAPP holds a globally diversified portfolio of asset classes, such as equities and bonds, in addition to investments in inflation sensitive assets. To help LAPP achieve its goals, AIMCo employs a multi-strategy approach that makes use of commingled or pooled funds. This provides cost savings, efficient execution and diversification through access to a variety of products, such as fixed income, equity, inflation sensitive and non-traditional asset classes, including private equity and timberland.[29]
  • Public Service Pension Plan (PSPP)[30] – established in 1947, this plan is for employees of the Alberta government and other public service organizations.[31]
  • Special Forces Pension Plan (SFPP)[32] – established in 1979 for police officers, police chiefs, and deputy chiefs employed by local authorities in Alberta.[33]
  • Management Employees Pension Plan (MEPP)[34] – the foundations of this plan were established in 1972. Then known as the Public Service Management Pension Plan for management employees of the Alberta government and other public sector organizations. In 1994 the Plan changed and was renamed MEPP.[35]
  • Provincial Judges and Masters in Chambers Pension Plan (Registered) and Supplementary Retirement Plan for Provincial Judges and Masters in Chambers (Unregistered);[36] collectively known as the “Judges Pension Plan” – the registered part of the Plan provides benefits up to the maximum allowed for registered pension plans under federal tax rules. The unregistered part of the Plan provides benefits in excess of those limits. Established in 2001 with provisions retroactive to April 1, 1998, the Judges Pension Plan replaced the Provincial Judges and Masters in Chambers Pension Plan established September 1, 1988. Prior to that, judges and masters in chambers contributed to the Public Service Management Pension Plan.[37]
  • Supplementary Retirement Plan for Public Service Managers[38] – established on July 1, 1999, this plan provides additional pension benefits to public service managers of designated employers who participate in the Management Employees Pension Plan (MEPP) and whose annual salary exceeds the yearly maximum pensionable earnings limit under Canada’s Income Tax Act.[39]

Government Funds[edit]

The Government funds managed by AIMCo are used for Albertan services such as health care, education, infrastructure and social programs. These funds tend to include larger amounts of operating capital and therefore have a lower risk-tolerance to market fluctuation. As a result, investments are primarily in fixed income assets in order to secure reduced exposure to market volatility.

Citations[edit]

  1. ^ "Alberta Investment Management Corp", AIMCo, retrieved 26 July 2013 
  2. ^ "Alberta Investment Management Corp Board of Directors", AIMCo, retrieved 26 July 2013 
  3. ^ AIMCo - Alberta Investment Management Corp. Aimco.alberta.ca (2008-01-01). Retrieved on 2013-07-26.
  4. ^ Legislation establishes new provincial corporation to manage Alberta's investments
  5. ^ "AIMCo Posts 7.9% Gross Return for the Latest Fiscal Year". SWF Institute. June 28, 2012. Retrieved 2012-06-28. 
  6. ^ a b "Annual Report 2009" (PDF), AIMCo, Edmonton, Alberta, 31 March 2009, retrieved 7 February 2015 
  7. ^ a b Nemeth, Denes (March 22, 2016). "AIMCo Announces Strong Returns for Clients in 2015" (PDF). Retrieved June 27, 2016. 
  8. ^ "Research Study on the Canadian Retirement Income System". gov.on.ca. 
  9. ^ "AIMCo Annual Report 2014". www.aimco.alberta.ca. Retrieved 2016-06-27. 
  10. ^ "AIMCo Annual Report 2013". www.aimco.alberta.ca. Retrieved 2016-06-27. 
  11. ^ "AIMCo Annual Report // Aim True". www.aimco.alberta.ca. Retrieved 2016-06-27. 
  12. ^ "AIMCo Annual Report 2011-2012" (PDF). 
  13. ^ "AIMCo Annual Report 2010-2011" (PDF). 
  14. ^ "AIMCo Annual Report 2009-2010" (PDF). 
  15. ^ "AIMCo announces sale of Autopista Central toll road in Chile". 
  16. ^ "AIMCo, Allianz and Hastings successfully bid for Acquisition of Porterbrook". 
  17. ^ "AIMCo Completes Aquistion of 50% interest in Grupo Saesa" (PDF). 
  18. ^ "Consortium agrees to purchase 100% of London City Airport from Global Infrastructure Partners and Highstar Capital". 
  19. ^ "BBC Television Centre". www.aimco.alberta.ca. Retrieved 2016-06-27. 
  20. ^ "Annual Report" (PDF), AIMCo, 31 March 2012, retrieved 7 February 2015 
  21. ^ "Board of Directors", AIMCo, 31 March 2013, retrieved 7 February 2015 
  22. ^ "Alberta Investment Management Corporation Regulation". Alberta Queen's Printer. Retrieved June 27, 2016. 
  23. ^ "Annual Report" (PDF), AIMCo, 31 March 2011, retrieved 7 February 2015 
  24. ^ "AIMCo's Board of Directors". 
  25. ^ "Alberta Heritage Savings Trust Fund Act" (PDF). December 11, 2015. Retrieved June 27, 2016. 
  26. ^ a b "Historical Timeline", Government of Alberta, Heritage Fund, Treasury Board and Finance, December 2, 2014 
  27. ^ International Forum of Sovereign Wealth Funds. "IFSWF Our members". Retrieved 24 September 2016. 
  28. ^ "Local Authorities Pension Plan". 
  29. ^ "Local Authorities Pension Plan Website". August 2011. Retrieved August 2011.  Check date values in: |access-date= (help)
  30. ^ "Public Service Pension Plan". 
  31. ^ "Public Service Pension Plan Website". August 2011. Retrieved August 2011.  Check date values in: |access-date= (help)
  32. ^ "Special Forces Pension Plan". 
  33. ^ "Special Forces Pension Plan Website". August 2011. Retrieved August 2011.  Check date values in: |access-date= (help)
  34. ^ "Management Employees Pension Plan". 
  35. ^ "About MEPP Section - Management Employees Pension Plan Website". August 2011. Retrieved August 2011.  Check date values in: |access-date= (help)
  36. ^ "Provincial Judges and Masters in Chambers Pension Plan". 
  37. ^ "Judges Member Handbook" (PDF). December 2003. Retrieved August 2011.  Check date values in: |access-date= (help)
  38. ^ "About SRP Section - Alberta Pensions Services Corporation Website". August 2011. Retrieved August 2011.  Check date values in: |access-date= (help)
  39. ^ "Department of Justice Canada Website". June 2011. Retrieved August 2011.  Check date values in: |access-date= (help)

References[edit]

  • "Annual Report" (PDF), AIMCo, 31 March 2013, retrieved 7 February 2015 :39

External links[edit]