When Alberta’s public pension manager lost $2.1 billion In a risky bet on market volatility in 2020, little scorn or blame fell on then-Prime Minister Jason Kenney or his government.

For what? The investment decisions of the Alberta Investment Management Corporation (AIMCo) are independent of government. The Firm’s sole role is to appoint directors to the fund manager’s board and let the experts invest, trade and (ideally) grow the funds.

The group of teachers whose pension funds the Kenney government transferred to AIMCo control were understandably frustrated. The fate of their economies was tied to the ups and downs of the wealth giant at that time, but the teachers’ union was not lobbing rhetorical grenades at the prime minister for the loss itself.

That distance between politicians and pension investors narrowed significantly this week, when Finance Minister Nate Horner took the unprecedented step of removing AIMCo’s entire independent board of directors, appoint itself a temporary single board of directors and fire CEO Evan Siddall.

Any future rhetorical grenades (and bouquets) can be directed to the Minister of Finance and Premier Danielle Smith.

Ready, AIMCo, fired

Horner has pledged to appoint a new board within a month, but in the meantime he has appointed Ray Gilmour, a seasoned senior provincial official who lacks experience in the world of management, as interim CEO. managing large funds, but who worked in Alberta banks for over two years. decades ago.

The Smith government started the movement such as “restoring confidence in AIMCo” after underperforming financial results and rising costs. Sebastien Betermier, a leading pension fund analyst, doesn’t see this as a way to build confidence in the agency’s ability to make the sophisticated long-term investment decisions it needs.

“For me, it’s exactly the opposite,” Betermier, executive director of the International Center for Pension Management, told CBC News. “It flies in the face of full independence, the ability of funds to operate at arm’s length from government.”

When the province created AIMCo in 2007, the then Conservative government MPs excluded to sit on the board of directors of the fund manager, to guarantee its independence. An order from the firm this week temporarily canceled this rule.

Betermier, a finance professor at McGill University, said the seemingly sudden unrest could also give pause to other major investors or companies that AIMCo partners with for large-scale investments. The fund is currently co-owner Yorkdale Shopping Center in Toronto with a major real estate developer (itself owned by an Ontario pension plan manager) and has built thousands of Apartments to rent in the UK in joint venture with a British company.

“When you see moves like this, where the government can step in any day and sack the entire board, it sends shudders to your ability to implement such projects in the future,” Betermier said.

Horner expressed some disappointment with AIMCo’s recent failures to meet growth targets, but said cost growth was the main reason for the decision. In announcing the board’s dismissal, his office noted that over the past four years, AIMCo has increased its personnel costs by 71 percent and its headcount by 29 percent.

“We want them to be a low-cost provider,” Horner told reporters.

What is not mentioned in this press release is that, thanks in part to the transfer of teacher pension funds to AIMCo’s portfolio, the total assets managed by the agency have increased over the course of this period, going from $115 billion to $166 billion, an increase of 44 percent. (Instead, the release says more funds are being managed by outside groups than before.)

Does an investment firm ensure better returns by reducing its workforce and hiring lower-paid executives?

Short-term frustration with costs can overlook the time needed to develop a long-term international investment strategy, Betermier said.

Among the country’s leading public sector pension managers, known as the Maple 8 — including the Canada Pension Plan Investment Board and the independent investment arms of B.C. governments and Quebec — it is the youngest, launched only in 2008.

It has recently caught up with its peers by establishing more international offices, including new York this year, its first Asian office in Singapore last year, and a recent plan by Siddall to more than double his presence in London.

“It’s a project where we can generate a lot of value for retirees, but we have to give it time,” Betermier said. “One of the main risk factors is precisely government interference, when you come in the middle of an initiative and cancel it.”

Horner isn’t the only one frustrated by the costs. Deb Gerow, president of the Alberta Retired Teachers Association, said expenses and management fees “concern us,” compared to previous, smaller operations of the educators’ retirement fund.

But is the mass dismissal of a board of directors the solution to a minister’s balance sheet frustrations?

“It seemed to me a rather extreme reaction given the problems identified by the government,” said Bob Baldwin, a experienced retirement consultant who chaired the CD Howe Institute’s Pension Policy Council.

This leads him to wonder what other considerations motivated the Smith government’s takeover of AIMCo.

Horner and his office said the move had nothing to do with the UCP’s consideration of removing Alberta from the Canada Pension Plan (and possibly putting AIMCo in charge of a mega-fund Alberta Retirement Board). According to them, it also has nothing to do with the Prime Minister’s ambition, reiterated at last weekend’s UCP convention, to transform the $23 billion Heritage Savings Trust Fund into a fund of 250 billion dollars by the middle of the century.

Horner and the premier certainly want to change the direction and approach of the Crown corporation that currently manages Alberta’s long-term savings accounts and retirement funds for thousands of residents. It’s not clear how they want this approach to change, other than producing wealth management on a smaller budget.

And what happens to AIMCo’s investments in the coming years will depend on the quality of executives Smith’s cabinet selects to run the agency, who will undoubtedly be more aligned with the directions desired by Horner and the former minister than a group appointed over several years by both. UCP and NDP prime ministers.

Success will be attributed to the actions of this government. The same will be true for future losses and failures.

It’s the same way the Smith government tied Alberta Health Services’ results to its own decisions, ousting the entire board in 2022 and then rethinking the entire structure of the system.

They took it apart and remade it, and will politically own everything that follows.