Provincial finance minister says renewed focus is required at the investment corporation
A sharp rise in costs at Alberta’s $169 billion AUM public investment manager was a catalyst for drastic action by the provincial government late last week.
The entire board of Alberta Investment Management Corporation (AIMCo) was dismissed with finance minster Nate Horner taking the chair role on a board for which he, for now, is the sole director. He later told reporters that this was not a knee-jerk reaction but followed concerns for some time.
Costs are at the centre of the changes at AIMCo with the government stating that there has not been a corresponding return on investment through.
From 2019 to 2023, AIMCo’s third-party management fees have increased by 96%, the number of employees increased by 29% and salary wage and benefit costs increased by 71%, the government stated in its announcement, while noting that a smaller share of funds were being managed internally.
“AIMCo’s work has direct consequences for Albertans. While they have achieved returns for their clients, we are acting to bring a renewed focus on the best possible returns and low operating costs,” the minister said.
A statement from the Alberta Teachers’ Retirement Fund aimed to reassure its members that their pensions remain secure amid the governance changes at AIMCo: “Nothing that has happened with regard to the changes at AIMCo thus far has caused us concern about the status of our investments,” it said, adding that it had previously raised concerns about costs at the provincial investment manager.
Other funds made similar statements of reassurance including the Public Service Pension Plan: “PSPP Corporation oversees the $20 billion fund and sets our investment strategy, while AIMCo implements our portfolio as the asset manager appointed by provincial legislation. Our investment management and relationship with capable AIMCo staff will continue through this change in leadership,” it said.
Political fallout
The finance minister’s temporary governance of AIMCo has caused political rumblings with NDP MLA Court Ellingson one of the first to question the decision to put a politician rather than an investment professional in the interim chair role.
“AIMCo is in charge of the pensions of 375,000 Albertans. And what is the signal to those Albertans that the UCP government sent today?” he said in a statement posted on his Facebook page. “They could have put in place a new interim board and CEO, rather than this drastic, earth-shaking move. They chose not to. This is supposed to be a non-partisan, arms-length organization. Appointing a UCP politician the head of it sends entirely the wrong signal to Albertans and the investment community.”
Ellingson said that the finance minister and interim CEO should be removed immediately and replace them with a non-partisan interim CEO and board, with anything else considered “reckless.”
Interim CEO
AIMCo has also appointed Ray Gilmour, the government’s deputy minster and secretary to the cabinet, as interim CEO, replacing Evan Siddall who had presided over the corporation since 2021 having previously headed the CMHC following a career in investment banking at firms including Lazard, Goldman Sachs, and BMO Nesbitt Burns.
Putting Gilmour in control is considered the best way to stabilize the investment manager for now, with a new board due to be appointed within 30 days including a new chair to take over from Horner.
“Ray has been the most trusted official in the province under three premiers. I have complete confidence in his ability to get costs at AIMCo under control and restore stability to the corporation,” said Horner.
Four other executives are believed to have also left AIMCo in the last week, although they have not been named.
CIO replaced
In September, AIMCo replaced its chief investment officer Dr. Marlene Puffer, although this appears to have been a decision made separately from the latest changes and was announced by Siddall.
“I want to thank Dr. Puffer for her deep commitment and for the value she has added. Her passion for investing on behalf of our clients is undeniable and her contributions to the organization will continue to position AIMCo for success in the future,” Siddall said at the time.
Investment oversight is now shared between Justin Lord who was appointed senior executive managing director, global head of Public Markets in newly established leadership role and joins the Executive Team; and David Scudellari appointed senior executive managing director, global head of Private Assets and Strategic Partnerships in a broadened Executive Team role.
The Alberta government says that clients will not experience any disruption to their portfolio during the transition to new leadership and that Minister Horner will not make any investment decisions or receive any compensation for his roles.
