Increased costs and lagging returns are the reasons that the government of Alberta cited in dismissing Alberta Investment Management Corp.’s entire 10-person board, including CEO Evan Siddall. But according to Keith Ambachtsheer, director emeritus of the Toronto-based International Centre for Pension Management, the government is acting in bad faith.
The Canadian province’s government said that this culling of leadership stems from “significant increases in operating costs, management fees and staffing without a corresponding increase to return on investment.”
However, Ambachtsheer calls this claim “outrageous,” adding that while this move from the government is “shocking,” he believes there have been similar incidents. “There is a history with this government,” he said, citing Premier Danielle Smith firing the Alberta Health Services board in 2022.
“We’re dealing with a government that we’ve never seen before in Canada,” Ambachtsheer told Institutional Investor.
The government will replace AIMCo’s board within 30 days. In the meantime, Ray Gilmour, who has served as Alberta’s top public servant for over five years, will be interim CEO. Nate Horner, the province’s treasury board president and finance minister, will serve as AIMCo’s sole director and chair until a new director and chair are named.
AIMCo manages more than C$166 billion ($123 billion) in assets globally on behalf of pension, endowment, insurance, and government funds in the Province of Alberta. The government claimed that from 2019 to 2023, AIMCo’s third-party management fees increased 96 percent, its staff grew by 29 percent, and salary, wage and benefit costs rose by 71 percent.
The government also contends that these rising costs haven’t yielded adequate returns. The investment manager reported a total net fund return of 6.9 percent for the year ending December 31, nearly two percentage points below its 8.7 percent benchmark. The fund also underperformed in 2019 and 2020, with returns of 10.6 percent and 2.5 percent, respectively, compared to benchmarks of 11.1 percent and 8 percent. Over this four-year period, as AIMCo’s fees nearly doubled, a composite representing the performance of all funds that it manages achieved an annual average return of 7.62 percent.
Ambachtsheer disputes this. “They say it has to do with cost overruns and poor performance,” he said. “But there’s nothing in the official annual reports that support those claims. So, they’re making it up!”
The management company’s latest annual report shows that AIMCo’s two-, three-, four-, and five-year annualized net returns all outperformed their benchmarks — returning 1.6 percent, 5.8 percent, 5 percent, and 6.1 percent, respectively. By comparison, the benchmarks for these same periods were 1.5 percent, 3.6 percent, 4.7 percent, and 5.9 percent.
And while its annual return slightly lags behind many of its peers, AIMCo is still in line with the recently reported annual returns for British Columbia Investment Management Corp., which posted a 7.5 percent return for the fiscal year ending March 31, 2024. Both PSP Investments and Caisse de dépôt et placement du Québec returned 7.2 percent for their latest one-year periods. (PSP’s results were for the fiscal year ending March 31, 2024, while CDPQ’s returns were for the calendar year ending December 31, 2023.) However, AIMCo’s return is well above Ontario Teachers’ Pension Plan’s 1.9 percent return for the year ended December 31.
Regarding costs, Ambachtsheer noted that AIMCo’s 2023 investment management and operating costs were reported at 0.66 percent of assets under management. The comparable numbers for Investment Management Corporation of Ontario (IMCO) and BC Investment Management Corporation (BCI) were 0.81 percent and 0.54 percent, respectively.
This latest overhaul also follows a series of recent leadership changes at the firm. In September, AIMCo announced CIO Marlene Puffer’s departure and promoted two executives, providing few details on the changes. And back in 2020, a failed volatility-trading plan that cost the fund billions led to the departure of then-CEO Kevin Uebelein and a significant reconstitution of the board, thrusting AIMCo into a fierce political clash between Alberta’s right-leaning government and its unionized clients.
However, Ambachtsheer said that event from four years ago “has nothing to with” this latest move from the government. “The blowup was in 2020. A new board came in with a highly qualified CEO [Siddall], then boom! This happened.”
Representatives from the government of Alberta did not respond to II’s requests for comment on the criticism.
