Alberta Politics
When investments in thousands of square metres of Calgary office space like this have to be written down later this year, AIMCo will take another hit (Photo: Twitter).

Can Kenney’s plans for Albertans’ pensions survive the next round of bad AIMCo news?

Posted on May 29, 2020, 1:00 am
6 mins

Alberta’s Local Authorities Pension Plan was in “the healthiest position in its 58-year history” at the end of 2019, and things are still fine, the president and CEO of LAPP Corp. said in a message Friday to plan members and retirees.

It would be going too far to call Chris Brown’s communication cheerful, but it was certainly intended to be upbeat and reassuring in advance of what’s likely to be more bad news in the first-quarter financial update by the Alberta Investment Management Corp., which manages the province’s largest public pension plan’s investments on behalf of LAPP’s Board.

How bad? Well, we won’t know that until we see the first-quarter results from AIMCo. some time in the next couple of weeks.

Local Authorities Pension Plan Corp. CEO Chris Brown (Photo: LAPP Corp.).

As is well known, AIMCo is already mired in controversy as a result of its multi-billion-dollar loss gambling on market volatility and the Kenney Government’s determination to make it the manager of all Alberta public pension plans, including the province’s portion of the Canada Pension Plan.

AIMCo’s losses on the bad volatility bet alone were first reported to be in excess of $4 billion, although AIMCo CEO Kevin Uebelein later published a statement saying they were only $2.1 billion.

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

But the volatility investment fiasco isn’t the only thing wrong at AIMCo. As the Globe and Mail reported on May 6, in a story unfortunately hidden behind its paywall, AIMCo. has been significantly underperforming other pension managers for more than a decade. “LAPP … is decidedly underwhelmed by AIMCo’s performance of late,” wrote Max Fawcett, a former editor of Alberta Oil magazine.

Of course, that fact didn’t stop Alberta Finance Minister Travis Toews from claiming last fall in a Postmedia op-ed accusing “union bosses” of “scaremongering” that AIMCo “regularly achieves spectacular investment performance.”

Alberta Finance Minister Travis Toews (Photo: David J. Climenhaga).

Regardless of whether there’s been any any scaremongering, AIMCo’s recent disasters and the carnage on the world’s stock markets caused by the COVID-19 pandemic shutdown unquestionably have public pension members and retirees a jittery mood. Many more Albertans are worried about the United Conservative Party plans for the CPP. Teachers forced by law to hand AIMCo their savings in the independent Alberta Teachers Retirement Fund are furious.

Despite the stock market downturn, Mr. Brown said in his message, the LAPP remains in surplus — 109 per cent now, versus 119 per cent at the end of 2019.

“LAPP has not been immune to the impacts of the economic crisis across its full investment portfolio,” he continued, “however, the measures put in place by LAPP did protect the plan from the worst of the impacts in the stock market.”

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

The downside protection strategy by the plan, which manages retirement security for a majority of UNA members, had also reduced the severity of losses, Mr. Brown said.

While there is no way to predict what will happen over the remainder of the year, the plan has weathered the storm well, particularly compared to many others,” he insisted.

This is all true. But how will Mr. Brown’s rosy assessment be impacted if AIMCo’s first-quarter and subsequent quarterly results turn out to show its underperformance is significantly worse?

Remember, the downside protection strategy cited by Mr. Brown wasn’t adopted by Alberta’s other public sector pensions — so when AIMCo’s first-quarter results are posted, shrewd observers will look to see how the Public Service Pension Plan and the Special Forces Pension Plan are faring in comparison to LAPP. Those results will show the real malaise with AIMCo.

Observers might also want to check to see if LAPP’s success with strategies that countered AIMCo’s bad bets makes AIMCo’s own results look better than they ought.

And what happens later this year when the returns from LAPP’s significant investments in illiquid assets like vacant office towers in Calgary, New York and London must be totted up? Surely losses from empty corporate office space in Calgary are going to have to be written down too, probably in the third quarter.

It will be interesting to see if Alberta Premier Jason Kenney’s claim there’s a “compelling case” for grabbing CPP funds survives the next round of bad news.

11 Comments to: Can Kenney’s plans for Albertans’ pensions survive the next round of bad AIMCo news?

  1. Athabascan

    May 29th, 2020

    At which point will Albertans finally realize Kenney’s UCP are looting the province?

    Our biggest threat is not COVID -19, it’s Kenney. The virus is likely going to disrupt our lives for another 1-2 years, but the fallout from Kenney’s actions will last a lot longer; maybe even an entire generation. Alberta will be the last province to recover financially in a post-COVID-19 world.

    All Albertans will suffer financially whether they voted for him or not.

  2. Patrick Hertel

    May 29th, 2020

    “only $2.1 billion”

  3. Ger Enz

    May 29th, 2020

    No one has yet adequately explained how, in a business relationship between two parties making equal contributions, one party gets to dictate the terms of the relationship, without consultation. This is exactly what the government has done to the teachers ATRF, forcing educators (who in no uncertain terms do NOT want AIMco managing their investments) to hand over one of the better run pensions to AIMco investment managers who do not fully understand derivatives, and their board who had no idea of the enormous potential for loss with the volatility bet. Everyone understands that the gov’t wants to get their paws on those dollars to prop up O & G.

    This is the Dieppe to the UCP’s Normandy invasion of Albertan’s CPP, except that this time there is no good reason for it, the casualties will be huge, and we will lose.

  4. alan

    May 29th, 2020

    Apparently, the deliberate ideological bait and switch designed to enrich the cult like UCP social/business network continues to be well lubricated at all times. So called ‘businessmen’ can succeed in conspiracies against the public in the following cases:

    1. When they are given protection by government regulation.

    2. By direct collusion and entanglement of government representatives.

    3. Or, by a lack of independent third party oversight/regulatory controls.

    Which leads to the following scenario(s):

    “Alberta pension plan split not about efficiency, says former CEO of AIMCo”

    “In an unpublished study (2017) I wrote showed that AIMCo’s Alberta directors were large donors to the Progressive Conservative Association of Alberta, personally or through their companies.”

  5. Murphy

    May 29th, 2020

    I have a very strong suspicion that the “performance” of just about everyone’s pensions is going to prove rather unpredictable as the decoupling from China and concurrent reduction in living standards in North America really takes hold. Basically our economy is set up to dump any surplus productivity into the speculative casino, and that has resulted in various debacles for pension funds, such as lapping up junk bonds, or this heart-warming tale:
    “One of Canada’s largest long-term care operators is owned by a federal Crown corporation…
    …Another $25-million class-action lawsuit has been filed against Revera over its operation of the McKenzie Towne Continuing Care Centre in Calgary, where COVID-19 killed 21 residents and infected 63 others as well as 44 employees.”

    “The Carter Family – Keep on the sunny side”

  6. jerrymacgp

    May 30th, 2020

    “Scaremongering by union bosses … “? Might that perhaps the same scaremongering that has been sounding the alarm for years, nay decades, about inadequate staffing levels & inhumaine conditions in continuing care settings all across Canada, only to be brushed off as “greedy union bosses just want to pad their membership rolls & dues revenues” … only to be validated by none other than the Canadian Armed Forces? The appalling conditions in Ontario care centres are not new to the current pandemic, although the pandemic has most decidedly exacerbated them — and they are not unique either to Ontario nor to for-profit operators, given the “run it like a business” management trends even in public services.

    Maybe we should just ask Minister Sajjan to mobilize the Reserves & send the Army into every care centre in Canada, & have DND run all of them. He can bill the provinces for the cost.

    • David Climenhaga

      May 30th, 2020

      Jerry: I think Mr. Toews’s reference in this case was about the union concern that their members’ pensions could be devalued by some of the things AIMCo might get up to if Peter Lougheed’s promise of real pension independence, finally delivered by the NDP in 2018, giving the board the power to switch investment bodies if need be, was not honoured. We now know the kinds of things AIMCo is inclined to get up to, so the concern seems justified. That said, a greater concern from my perspective is the UCP’s ideological commitment to getting rid of defined-benefit pension plans and co-operative investment management altogether. I actually think your send-in-the-army-permanently plan is an excellent idea, all the more so as it would allow us to raise military spending to the levels demanded by our Great Friend and Ally to the south without pissing it away on F-35s and like boondoggles, not to mention an excellent excuse to stay out of the next doomed imperialist war of choice. Erm, sorry, too busy right now looking after the old folks! DJC

      • Comment

        May 30th, 2020

        We don’t hear much about the UCP’s desire to get rid of defined-benefit pension plans…but you know it’s on the agenda.

      • jerrymacgp

        May 31st, 2020

        I think my point about Toews’ “scaremongering” line was that unions’ warnings on AIMCo should only be ignored at our peril; they will undoubtedly be proven right in the end, just like our years of warnings about long-term/continuing care have been.


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