Alberta Politics
Alberta Teachers Association President Jason Schilling: “Listen to teachers and stop the takeover!” (Photo: David J. Climenhaga).

Already reeling from bad news, Alberta learns its Crown investment corporation just lost $4 billion on a bad bet

Posted on April 23, 2020, 1:50 am
7 mins

Albertans reeling from the shock of a week that’s included oil prices so low you have to pay people to haul the stuff away and a mishandled COVID-19 outbreak at a slaughterhouse south of Calgary that sent infection rates soaring were rattled again yesterday by news the province’s Crown-owned money-management corporation had somehow managed to lose $4-billion.

Not that the previous 52 weeks have been much better, but if the first week of Jason Kenney’s second year as premier highlights anything about his United Conservative Party Government, it’s that it’s not just remarkably incompetent, it’s remarkably unlucky too!

Alberta Investment Management Corp. Chief Executive Kevin Uebelein (Photo: AIMCo).

In a bombshell scoop, the Toronto Globe and Mail revealed Tuesday that the Alberta Investment Management Corp., which is supposed to manage $119 billion for the province’s public sector pension funds and about $18 billion that’s left in the Alberta Heritage Savings Trust Fund, was out more than $4-billion “on what clients are calling a wrong-way bet against sharp swings in stock prices.”

Most Albertans woke up to the news yesterday. The bad trade wiped out all of the value generated by AIMCo in the previous five years, noted Opposition Leader Rachel Notley, who experienced some tough breaks herself during her four years as Alberta’s NDP premier. The loss was the equivalent, as the Globe’s reporters noted, of more than a third of AIMCo’s 2019 investment income.

Alberta Premier Jason Kenney (Photo: David J. Climenhaga).

I won’t belabour the details of the Globe’s story. You can read it yourself. Suffice it to say Mr. Kenney’s spinmeisters have half a point when they complain people like Ms. Notley shouldn’t be blaming the government for AIMCo’s troubles because the corporation is supposed to operate at arm’s length.

That’s where the bad luck comes in.

Of course, no Crown Corporation is ever truly at arm’s length from government, even without a control-freak like Mr. Kenney at the helm.

But AIMCo was already in the middle of a nasty controversy owing to the UCP’s determination to make it illegal for reluctant public pension plan boards ever to drop the company as their investment agency, whether they like it or not, and indicators the government might try to dip into AIMCo funds to prop up the province’s languishing fossil fuel sector.

Alberta Opposition Leader and former premier Rachel Notley (Photo: David J. Climenhaga).

The Globe’s reporters noted that the Local Authorities Pension Plan, Alberta’s largest public sector pension, “has flagged poor performance as a problem for many years, noting in its most recent report that ‘AIMCo has been short of LAPP’s value-added expectations for 46 consecutive quarters, or 11 years and six months.’”

Particularly controversial was the UCP’s recent decision to force the assets of the well-managed Alberta Teachers Retirement Fund into AIMCo’s coffers, a policy many teachers view as tantamount to outright theft of their retirement savings.

Yesterday, the teachers’ union was back at it, pressing the government to repeal the bill that will transfer the ATRF’s funds to AIMCo next year. “Teachers invest their own money into their pension plan,” said Alberta Teachers Association President Jason Schilling.  “Teachers were not consulted on the takeover and this story further validates our concerns. I am calling on the Government of Alberta to finally listen to teachers and stop the takeover by repealing Bill 22.”

But at yesterday’s daily COVID-19 briefing, which Kenney Government officials regularly hijack to make unrelated announcements, a crabby Premier Kenney made it clear to reporters’ he has no intention of doing that.

Progress Alberta Executive Director Duncan Kinney (Photo: David J. Climenhaga).

That’s where the incompetence comes in.

This isn’t the end of the story, either. Last night, Progress Alberta, which often acts as a thorn in the UCP Government’s side, published a report revealing every publicly traded oil and gas company AIMCo has invested in since it got an invest-local directive in 2015 — “more than $1.1 billion dollars over the past three and half years” — has seen its share price fall.

AIMCo has been engaging in this bailout of Alberta’s oil and gas industry for several years, losing tens of millions in the process,” said Progress Alberta Executive Director Duncan Kinney. “The answer is not to keep trying to prop up Alberta’s oil and gas industry with huge sums of money, but to fund a transition so these companies can adapt and function in a low carbon economy.”

As for a $4-billion loss by a money-management company, no matter how well intentioned, that would be a firing offence most places. This is true even if, as AIMCo’s spokesperson insisted to the Globe, no internal or external rules were broken.

One would think that would apply to the chief executive as well as the employee who made the decision. Whether that’s true for Chief Executive Kevin Uebelein, hired in 2015, or any member of his executive team, remains to be seen. I do note with interest, however, that AIMCo is seeking a new “results focused” market risk analyst.

Ability to validate historical market data and test backfill methodologies where needed are said to be assets. I’m not sure what backfill methodology is, but it sounds like it might be handy about now!

The anniversary of Mr. Kenney’s historic election victory was one week ago today. Are you ready for 155 more weeks of this stuff?

23 Comments to: Already reeling from bad news, Alberta learns its Crown investment corporation just lost $4 billion on a bad bet

  1. Magda

    April 23rd, 2020

    This province makes a lot more sense if you view it as the largest cosplay game in the world. It’s the Calgary Stampede writ large: bunches of people who would need a ladder and strong rope to get on an actual horse walking around in cowboy hats and boots and greeting each other with “Howdy!” every minute of the day and throwing out their chests in that good old pioneering way. Same thing with the province: we’re all down-to-earth people-of-the-soil types who get down and work hard with our hands and don’t need no fancy-prancy book learnin’ to make a good living and raise our families. We’ve got to let go of this fantasy and face reality. We can compete without this addiction to the oil industry. It just involves letting go and having some confidence in our ability to create the new economy.

    I found an interesting quote in a tweet yesterday: “We are watching people go through withdrawal from the emotional addiction to the myth of certainty.” I really think that is relevant to Alberta right now. Many of us are throwing huge tantrums because we really don’t believe we can cut it in the new world. We’re frightened and the UCP/CPC encourage that with everything they do and say. That’s why we’re so drawn to conspiracy theories: if there’s an evil power against us, then there’s got to be an equally good power that can save us. And it wears a cowboy hat and boots.

    Reply
    • Rocky

      April 23rd, 2020

      It’s like one of those Manichean, Zoroastrian, Yazidi things, eh, Magda? What if there were two gods, one good and one evil, and we’d been worshipping the wrong one? What if it turned out the good one wore sandals, not alligator-skin boots? Oh! Wait!

      Reply
      • Magda

        April 23rd, 2020

        Or even – coloured, patterned socks? The horror!

        Anyone want to translate what Murphy said below? I don’t understand it.

        Reply
    • Murphy

      April 23rd, 2020

      I see no greater evidence of the “addiction to the myth of certainty” than the use of the term “conspiracy theory”. We are subject to an unrelenting deluge of conspiracies. Vivian Krause is a hack, but if you think that a strategic asset like oil is not the subject of every intelligence and corporate scheme under the sun, you’re not paying attention. The term “conspiracy theory” is a thought-terminating cliché. There are a host of evil powers arrayed against us, not the least dangerous of whom is mass media owned by enormous multinational conglomerates, who also enthusiastically embrace use of the “conspiracy theory” meme.

      Reply
  2. Alex Polkovsky

    April 23rd, 2020

    “Are you ready for 155 more weeks of this stuff?” My heart skips a beat! No, really, he’s going to give me arrhythmia.

    Reply
  3. Athabascan

    April 23rd, 2020

    AIMCo just lost $4-billion, but that’s OK, because today Kenney announced he is borrowing $25-billion, so all is well.

    Under Kenney-economics we are $21-billion ahead.

    That’s bible-school dropout math.

    No doubt oil & gas sector will get most of that borrowed money. Whatever Kenney does with it, I hope he doesn’t waste it on health and education, or other such socialistic non-sense. That’s sarcasm by the way, and not meant to be construed as strategic advice for the GOA, sut in case they are reading this.

    Reply
    • Derek

      April 23rd, 2020

      OMg hahahah thanks for the laugh. Too bed he’s doomed us

      Reply
  4. Dave

    April 23rd, 2020

    I have some sympathy for investment managers, knowing some people who work in this field. The times and market volatility are unprecedented, so it was probably not carelessness that led to this, but a situation most people did not really anticipate.

    Also, Mr. Kenney who does not remind me of the Queen in any conventional way, is certainly having his own annus horribilus and he hasn’t even been in power for much more than a year now. I am not sure how much more of this Alberta or the UCP can take. I am not as inclined to be sympathetic to him, in part because he has done a number of things to make the situation worse. However, I would like to offer him some free but good political advise in case he actually reads columns such as this on line.

    As the old saying goes – when you find yourself in a hole the first thing to do is stop digging. I think is is unlikely that even a micro manager such as Mr. Kenney is interfering too much in the day to day trading and investing of AIMCO, hopefully he is not and if he is, he should stop. The things he can more control are his governments decisions about pension management for those funded by provincial government. In particular, he made an announcement to move the teachers pension plan to be managed by AIMCO. He should just issue a quiet press release, perhaps late on a Friday afternoon (the sooner the better) saying it is being suspended pending further consultation with teachers and then just drop the crazy transfer idea and totally forget about it. Likewise, his government has done various things to unnecessarily antagonize doctors and the best political advise would be to drop it all too.

    Mr. Kenney seemed to be more competent when he was under the control and stewardship of Mr. Harper. Perhaps it proves the saying that everyone rises to their own level of incompetence. Since he has gone free range, he has made a number of unnecessary blunders. His political honeymoon in Alberta is now over and unlike the Queen he will be facing an election in a few years. It will not go well for him, if he does not get his act together very soon.

    Reply
    • Lulymay

      April 23rd, 2020

      The following quote was supplied on one of the threads I tend to read in the internet”

      “A recession is when your neighbour has to tighten his belt;
      a depression is when You have to tighten your own belt;
      and a panic is when you have no belt to tighten and your pants fall down.”

      Tommy Douglas quote

      When I was a kid in elementary school and we got into a yelling match with other kids, we used to yell
      out “liar, liar, your pants are on fire”. I truly believe that Mr.Kenney is past Mr. Douglas’ interpetation and
      and much more likely to be in pants on fire mode.

      Reply
    • Raj

      April 23rd, 2020

      Every Pit bull requires a leash! Unbridled rage can be dangerous!

      Reply
      • Northern Loon

        April 24th, 2020

        Don’t forget the muzzle!

        Reply
  5. Abs

    April 23rd, 2020

    In a way, this story is a nice distraction for Kenney and his maurauding men. This bungle of epic proportions involves money, lots and lots of money, blown on a gamble, which is what the UCP do best.

    At least the people will turn their attention for a moment to the pensions disappearing before their eyes. This will take their minds off that other big issue of major outbreaks of Covid-19 at the two major meat packing plants, and the hundreds of people carrying Covid-19, who live with meat packing plant employees, who have brought the virus into the workplace in Calgary’s south side hospitals, long-term care centres and retirement homes. Two meat packing plant workers have died now, but that is just the beginning. Dark days are ahead. Better to be thought of as an incompetent bungler, gambler or a thief, than a murderer.

    Yes, more lost billions will distract the peasants rather nicely, except of course for those seniors living in care centres and retirement residences on the south side of Calgary, now under rigid quarantine controls due to workers connected to the Cargill outbreak, some of whom who also have pensions mamaged by AIMCo. Those people are gravely concerned.

    Reply
  6. alan

    April 23rd, 2020

    Ha, ha . . . . the comedy is killing me. “The investments we make need to maximize net investment returns for our clients.” Maybe what is meant by “clients”, are the owners and directors of the private companies being subsidized.

    Denes Nemeth, director of communications with AIMCo, said:

    “[If] any provincial government directed AIMCo to manage a specific company, a specific asset, a specific type of infrastructure, absolutely not,” he said. “We have full investment discretion over what kinds of investments we make and they need to maximize net investment returns for our clients.”

    By the way, here is what “maximizing net investment returns” looks like in the real world:

    “There’s Calfrac Well Services, whose shares are down nearly 70 per cent since its June 2016 deal with AIMCo (and almost 80 per cent since it exercised the warrants it picked up in that deal in 2017). That’s better than Perpetual Energy, whose shares are down an eye-watering 95 per cent since AIMCo took a position in the company in February 2017. And the 9.1 million shares AIMCo picked up in Western Energy Services at $1.25 each in September 2017 are currently trading at 19 cents.” As of, November 27, 2019.

    Who is going to be left holding the backstop bag once private capital and the other big boys walk away fully and completely from the financing of the Alberta oil and gas sector? Could it be the Alberta taxpayers? The Federal government? Just like pipelines? Just like clean up costs?

    But, I forget they are “investments”, or so we are told. Investments that private equity has determined to be too risky, or not profitable. Apparently, private equity does not like loss of capital. Oh well, in order to socialize the losses there is always the government and the taxpayer.

    https://www.theglobeandmail.com/opinion/article-kenneys-stand-on-oil-and-gas-divestment-is-likely-to-leave-alberta/

    Reply
  7. Mobius

    April 23rd, 2020

    Duncan’s report is misleading. ATRF – that’s the teachers’ pension fund, and we know how much teachers think it can do no wrong – has a TON of direct investment through its public equity stakes in oil and gas. Enbridge, Suncor, TC Energy, CNR, Cenovus, Total…go on and tell me those investments haven’t taken a dive of late either.

    Oh, and ATRF has had a big stake in SNC Lavalin and Philip Morris, but strangely, no complaints from teachers on that. As long as the fund beats AIMCo’s returns, they’re happy to enjoy the benefits.

    Reply
    • Athabascan

      April 24th, 2020

      Oh, Ok Mobius. So, losing $4-bilion is alright because…teachers?

      So, what your saying is Kenney good, teachers bad. We got it.

      Reply
      • Mobius

        April 24th, 2020

        Did I say a $4 billion loss was good? Nope. It’s bad. Didn’t think I had to state the obvious, but apparently you’re a bit slow, so yes, it is horrible and I’d be fine seeing some heads roll at AIMCo. Start at the top with Kevin Uebelein if you need to.

        But has anyone asked if ATRF has experienced any losses?

        Are teachers fine with ATRF’s investments in oil and gas producers?

        Are teachers fine with ATRF’s investments in SNC Lavalin and Philip Morris?

        My point is that it’s easy to point the finger at AIMCo, and you should, but there’s a lack of critical thinking when it comes to their own fund, as long as the returns are higher than others apparently.

        Reply
        • Athabascan

          April 25th, 2020

          Who is slow now? Start at the top means Kenney and not some anonymous bureaucrat.

          By bringing up teachers and the ATRF, you are deflecting from the true cause of the $4-billion loss.

          IT IS KENNEY!

          Reply
  8. Jim

    April 23rd, 2020

    At the very least the board should be fired immediately without compensation if no rules were broken, clear incompetence in their oversight roll and grossly unqualified as they don’t understand what they are doing. Those managing the fund should be sent packing as well as they have demonstrated a lack of understanding in what they are purchasing. These types of volatility derivatives have infinite liability meaning they could lose it all and more. Pension funds need to be invested not gambled with and this behaviour is clear gambling.

    Reply
  9. interceptzen

    April 23rd, 2020

    A thought occured to me today about our leaders in the world today to wit: why are there so many bad leaders in the world. OK Jason Kenney CHEATED and BACKSTABBED his way to the top of the UCP but what made him think he could run this province. Was he thinking about the good citizens of Alberta or was he thinking of himself. Soes he have the moxie to steer our province in these troubling times? Absolutely not! Surely he must have known this. Surely he must have known
    Rachel Notley was light years ahead of him in everyway. But no, he had to bambozzle his way in. WHY. He never campaigned on taking the teachers pension. He never campaigned on most of the things he’s done. He made out like he was a competent leader and he’s not. I say enough is enough. Time for him to go. RECALL JASON KENNEY

    Reply
  10. Just Me

    April 23rd, 2020

    Remarkably unlucky? Yes.

    Remarkably stupid? Seems that way, as well.

    It should be noted that Kenney is becoming more and more testy with each passing week. I fully expect the angry midget act to not only return in full force, I except it to rage endlessly against Alberta. After all, were its people ever worthy of Kenney’s genius?

    PMJT is immune to Kenney’s rage. Hell, Kenney doesn’t even like going to Ottawa for premiers’ meets, because he knows that fellow ‘Resistor’ Doug Ford has frequent daily conferences with Trudeau. Ford even declared that Chrystia Freeland is a “calming influence” on him.

    Now that Doug Ford is no longer under his thumb, and the hated Peter MacKay is just a few months away from claiming the CPC leadership, Kenney has to lean on the likes of Jason Nixon to tell him how great he is.

    At this point, I have no doubt that the end of Kenney’s tenure is nigh. Denied an entre back into federal politics and, eventually, the PMO, Kenney’s political career fast turning from farce to tragedy.

    Since coming into Alberta’s premiership, Kenney has managed to cut a spectacular path of destruction through Alberta society that can only find its equivalence in rampage of Attila the Hun. He is a wrecking ball, destroying everything and anything that had any resemblance to civilization. And, finally, Alberta maybe the first Canadian province to see a massive population migration unless anything seen in the Western World.

    The prediction of 25% unemployment in a province of 4 million means that when one quarter of the working population in unemployed, it’s very liked that the remaining three-quarters are also unemployed or barely employed.

    The end of Alberta will be Kenney’s legacy.

    Reply
  11. jerrymacgp

    April 24th, 2020

    Risky investments seeking the possibility of high growth if the market goes the way you want are fine, if you’re investing your own money and can afford to lose some of it if the market goes the wrong way. It’s like casino gambling with money you can afford to lose. But institutional investments of other people’s money, which is what AIMCo does, need to be so low-risk that the only less risky strategy is stuffing the cash into a mattress. In this, they failed miserably in meeting their fiduciary duty to manage these funds responsibly. Heads have to roll.

    Reply
  12. Bernie

    April 24th, 2020

    If correct, the numbers shown in the 2nd paragraph suggest the money under investment was $137B. If correct the $4B loss, whether realized or non-realized (only on paper), would only amount to a 2.9% loss ($4B on $137B). This is minuscule in this highly volatile market where there have been several daily swings greater than that figure this year. I see no point in reporting these damning articles when their is no evidence of mishandling. “Reeling in shock”, really?!? This is just business as usual and not newsworthy. It reeks of political mud-slinging.

    Reply
    • Athabascan

      April 25th, 2020

      Is that you Jason Nixon?

      Reply

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