Reprinted from The Parkland Institute with permission. On the Road to AIMCo’s Politicization – Parkland Institute
The Alberta government’s abrupt dismissal of AIMCo’s board and CEO has raised alarms about political interference and the erosion of the corporation’s independence. The subsequent appointment of former Prime Minister Stephen Harper as AIMCo’s chair underscores concerns that the organization is being reshaped to serve partisan interests rather than focusing on its responsibilities to Albertans. Against this backdrop, understanding AIMCo’s evolution, governance challenges, and its politicization becomes more critical than ever.
The Establishment of the Alberta Investment Management Corporation (AIMCo)
Prior to the establishment of AIMCo, the investment assets of the province and public sector pensions were managed by the Alberta Investment Management (AIM) division of the Ministry of Finance. In 2005, the Finance department hired Ron Capelle and Associates, a Toronto-based pension consultancy, to examine whether the existing structure was “optimal.” The report identified human resources issues and restrictive budget practices that were preventing the organization’s capacity to achieve “investment excellence” (Capelle Associates, “Organization and Governance Review of Alberta Investment Management,” Sessional Paper 99/2007, page 9).
The study recommended creating a provincial agency or Crown agency led by a board of directors with the “appropriate accountabilities and authorities … carefully spelled out.” The board would select a CEO, determine a risk management framework, establish performance targets, review performance, and “ensure an optimal organization design including compensation.”
The government agreed, and the Alberta Investment Management Corporation Act was proclaimed in force on 1 January 2008. When introducing the Bill, Finance Minister Lyle Oberg stated:
[I]n the study they predicted that we would be seeing increases of 100 basis points, which would rise to around a $500 million improvement on a per year …. We’re slightly more conservative, and we’re expecting to receive anywhere from 25 to 50 basis points, but even at that we’re looking at a potential of $250 million.
In addition to improved returns, the new structure was to “provide more flexibility” and “have the potential of creating an investment centre in Alberta.” There also was the expectation that AIMCo would staff up and bring in-house investment activities which had been farmed out to external managers outside of Alberta at a lower cost to AIMCo’s clients.
In April 2016, my preliminary assessment of four major funds managed by AIMCo from 2008 to 2015 concluded that AIMCo did not add any value relative to AIM, and actually resulted in an annualized $93 million lower return. I also noted that the primary beneficiaries of the corporatization appeared to be the hundred or so employees who made the transition from AIM to AIMCo and captured higher salaries (higher costs) paid from investment income and contributions of pension participants and other funds like the Heritage Fund.
Perhaps the greatest failure of the AIMCo experiment has been the absence of a public, independent report on whether AIMCo was meeting the goals set by the Capelle report or the expectations of Minister Oberg.
From 2010 to the time the NDP was elected in April 2015, several public sector pension boards (PSPBs) were unhappy with the way they were treated by AIMCo. This displeasure was evidenced in various comments in the funds’ annual reports. Throughout this period, I heard complaints from well-placed sources that then-CEO Leo de Bever had little time for his clients’ concerns. De Bever exited under a cloud in 2014, due to concerns of a conflict-of-interest situation and the purchase of viatical insurance contracts, which drew the attention of the Auditor General. In January of 2015, a new CEO, Kevin Uebelein was hired, in part, to mend fences with the PSPBs.
Another development of significance was the evolving politicization of AIMCo’s board with nine board members being significant donors to Progressive Conservative parties and leadership candidates from 2008 to 2018. Prominent donors included Daryl Katz, who personally and through his corporations contributed over $257,275; Mac Van Wielingen, an investment banker who contributed $18,500 personally and $91,180 through ARC Financial; and Russ Grieve, the CEO of PCL, who donated only $1,500 personally but also $185,471 through PCL. Since 2020, the only appointment with a strong donation record is Jason Montemurro, appointed in 2024. According to Elections Alberta, Montemurro has donated $9,360 to the UCP since 2018, including $2,500 for the 2022 UCP leadership.
NDP Response to Clients’ Concerns
In response to the PSPBs concerns, the NDP introduced Bill 27, the Joint Governance of Public Sector Pension Plans Act, in 2018. Key changes included a five-year transition period for the exclusive use of AIMCo, after which pension boards would be free to move investments to other providers. This sent a clear signal to AIMCo and APSC to improve investment and service performance. The Act took away the government’s role as a trustee and administrator of the funds. In addition, it mandated that any changes to benefits or to the structure of the plans (changing the plan from a defined benefit plan to a defined contribution plan, for example) would have to be negotiated jointly between employers and employees’ representatives. This would make it virtually impossible for public sector employers to unilaterally change an existing defined benefit plan to a defined contribution plan.
UCP Discovers AIMCo
Although the United Conservative Party’s 2019 Election Platform Alberta Strong and Free was silent on investment management, public sector pensions, and AIMCo, its first budget featured these issues and organizations prominently. The vehicle for the overhaul was Bill 22, the Reform of Agencies, Boards and Commissions and Government Enterprises Act. Finance Minister Travis Toews’ Bill swept the assets of the Alberta Teachers’ Retirement Fund and the Workers’ Compensation Board under the control of AIMCo. Affected parties such as the Alberta Teachers’ Association and the ATRF board were not consulted, a practice that the UCP would repeat again and again in pensions and other policy areas.
The Act also restored the monopoly of service to AIMCo. The government held up AIMCo’s analysis of the ATRF’s performance as supportive of the business case to centralize investment management. The business rationale for bulking up AIMCo’s assets was provided by an internal document based on input from AIMCo and from a former British Columbia deputy minister of finance. The document was never released publicly but leaked to the media and various pension boards.
Toews then pledged to “deliver even better results on behalf of all Albertans: This is public money. It includes Alberta government funds and endowments as well as most of Alberta’s public-sector plans” (emphasis added). However, the only sums that could be considered “public money” were the Heritage Fund and the endowment and agency funds. Pension funds are not public money, so Minister Toews’ statement is highly misleading and likely further undermined trust in the government’s intentions with pension funds.
Another amendment allowed the minister to unilaterally impose investment management agreements between the PSPB and AIMCo. Fierce opposition and a lawsuit by the Alberta Teachers’ Association against the government sought to restore the ATRF board’s authority to set investment policy. During hearings at the Court of King’s Bench, questioning by the judge led the government and AIMCo to conclude they would lose and they agreed to settle out of court.
AIMCo and Energy Investments
Before Premier Smith’s statement in June 2024 that she might employ the Heritage Fund to “de-risk” energy projects, the UCP had not publicly declared that AIMCo or the Heritage Fund would assist the energy sector. However, the October 2015 announcement of the creation of the Alberta Growth Mandate employing three per cent of the Heritage Fund’s assets to be managed by AIMCo without political involvement by the NDP government produced a disastrous concentration of investments in Alberta’s then-struggling oil and gas sector. Incredibly, the mandate to help create more jobs, diversify Alberta’s economy, and increase technology adoption led to two-thirds of investments going to then struggling oil and gas companies. In addition to these questionable investments, Alberta’s public sector pension plan participants were given the “opportunity” to partner in these investments. AIMCo also made big bets supporting the Coastal Gaslink project and the Northern Corridor pipelines. More pipeline capacity means more production, which is the goal of the Smith government. Significantly, when opening AIMCo’s Calgary office in the fall of 2022, AIMCo’s CEO made it clear that they had no plan to divest fossil fuel assets.
VOLTS Came Out of the Blue
Worse was in store for AIMCo’s clients. In March 2020, with a worldwide pandemic declared, a volatility trading investment strategy (known as VOLTS) resulted in approximately $2.1 billion in losses to AIMCo’s clients, primarily PSPBs and the Heritage Fund. Toews, caught off guard, remained largely silent, which implied that the AIMCo board would sort out the mess. A subsequent report commissioned by the Board essentially exonerated the board, blaming a conflict between investment management and risk management for the losses. This lack of accountability pointed to a deep flaw in the board structure. The report is no longer available on AIMCo’s website.
Meanwhile, Toews appointed a new board chair that June, Mark Wiseman, formerly CEO of the Canada Pension Plan Investment Board (CPPIB). In November, AIMCo announced the early departure of CEO Uebelein. Other AIMCo officers were let go that year, including the Chief Risk Officer and the executive in charge of equities.
This imbroglio produced an arbitration process requested by some of the PSPBs against both the government and AIMCo. The PSPBs wanted $1.3 billion of VOLTS losses returned to public sector plan participants. Nearly three years after it was initiated, this arbitration is still ongoing.
In April 2021, the AIMCo board appointed Evan Siddall as CEO. Siddal was formerly CEO of the Canada Mortgage and Housing Corporation and an alumnus of Goldman Sachs and Irving Oil.
Your Pension, Their Choice — Alberta Pension Plan
At a press conference in September 2023, Nate Horner, the new finance minister, and the premier introduced an Alberta Pension Plan (APP) proposal. The government released an “independent” report from Lifeworks, an actuarial consultancy, which purported to support Alberta’s claim to 53 per cent of the Canada Pension Plan’s assets. A slick marketing plan, including a video, had been devised as “Your Pension, Your Choice,” which cost Alberta taxpayers about $7.5 million.
While it was unclear who would manage the APP’s assets, AIMCo would be the obvious candidate given its size and expertise.
On 20 December 2024, the Chief Actuary released a position paper which, while not giving a specific number for Alberta, recommended that Alberta could expect no more than 20 to 25 per cent of the CPP’s assets.
AIMCo Board, Executives Dumped
Then on 7 November 2024, Minister Horner, in a press release inaptly labelled “Restoring confidence in AIMCo,” publicly fired the 10-person board and Evan Siddall, AIMCo’s CEO. This morale-damaging firing happened when AIMCo was hosting a staff meeting at Edmonton’s Westin Hotel. Evan Siddall and three officers were taken aside and their office credentials and electronic devices were taken from them. Horner’s press release criticized higher staffing costs and fewer assets managed internally as the proximate cause. However, the government had not previously raised concerns about costs at the investment manager.
The following day, Ray Gilmour, Alberta’s most senior public servant, was named by Horner as AIMCo’s interim CEO. Gilmour had no investment manager experience, but was “trusted” with a “respectable” career.
Opinion was almost universally negative towards the move. CUPE Alberta stated that “unilateral changes to AIMCo’s board without any consultation with public sector unions representing members … shows a deep disregard for the fact that pension funds belong to Alberta workers and retirees, not the government.”
However, the sponsor and corporate boards of Alberta’s public sector pension plans like the Local Authorities Pension Board, Management Employees Pension Plan, and Public Service Pension Plan remained silent. The Special Forces Pension Plan sought to reassure its members that “There are no concerns that the transformation at the top of the organization will impact the good work done by investment staff who take care of these funds every day.” The ATRF stated “Nothing that has happened with regard to the changes at AIMCo thus far has caused us concern about the status of our investments,” and noted they had raised concerns about costs with AIMCo and the government.
Given the reconstitution of the board, the response by PSPBs has been disappointing. As noted in my 2021 Parkland Institute AIMCo study, the board is made up of individuals who do not represent the interests of the clients. Provinces such as Quebec and B.C. appoint directors representative of various funds managed by the agency. The failure of Alberta pension boards to recognize an opportunity to publicly argue for board seats is a missed opportunity.
A week later, a more in-depth Globe and Mail article reported occasional tensions between Siddall and some of the board members over “strategic direction and operations.” Stakeholders inside and outside the organization were also concerned about the board and CEO meddling in investment decisions, centralizing authority, unnecessary spending and high executive turnover. The article revealed that interim board chair Kevin Korner had pushed back against the government’s attacks on the board’s performance and spending. AIMCo’s attempt to “build a new, multibillion-dollar investment fund focused on the transition to a carbon-neutral economy” was at odds with UCP policy. Just days before, a UCP policy claiming carbon dioxide as a “nutrient” had passed at its annual general meeting.
Another UCP irritant was AIMCo’s diversity, equity, and inclusion (DEI) policies. UCP Policy Resolution number 1 was aimed at ensuring all hiring practices within the Alberta Public Service and the Alberta Crown Corporations would be “based solely on merit, competency, and equality of all persons regardless of race, gender, or creed and that all professional development programs” and DEI policies be eliminated.
A week later, rumours resurfaced about the appointment of Stephen Harper as AIMCo’s new chair, rumours that had been circulating for almost a year. Harper’s appointment came less than two weeks after the full board had been dumped. In addition to the Harper appointment, three UCP-appointed board members were reinstated after being fired! Katherine White, the Deputy Minister of Treasury Board and Finance, was also named to the board. Harper’s term, as do the other appointments, goes to November 2027.
Conclusion
At present, AIMCo is led by a former politician, two senior Alberta public servants, a donor to the UCP (Montemurro), a Calgary area developer (Dhillon), and an Ontario-based former pension executive.
Premier Smith intends to build the Heritage Fund or the sovereign wealth fund. She has mused about supporting or de-risking uneconomic energy investments with the public’s money. A major announcement is expected before the end of the year on how the government promises to build the fund up to $250 billion by 2050. It is anticipated that Harper will play a key role in its formulation.
Since 2015, AIMCo has integrated into its business plan the unstated goal of supporting Alberta’s struggling oil and gas sector. With the re-election of Danielle Smith, it has become apparent that Smith’s goal is to increase oilsands production and to use public moneys to pay for private sector environmental liabilities. The government, under the direction of a reconstituted AIMCo board, is prepared to use both public money (the Heritage Fund) and public sector pensioners’ money to finance the oilsands capital investment.
All Albertans should be deeply concerned about the politicization of investments by any government of whatever political stripe. While many Albertans hold idealistic memories of the Heritage Fund as an intergenerational source of wealth transfer, its history is riddled with political mismanagement (Ascah, 2015). All Albertans receiving or paying into the CPP or public sector pension plans should mobilize against the UCP’s plan to use their money, not public money, to increase CO2 emissions at the expense of the environment and their health.
Pension money is not public money. It is money contributed by plan participants and employers and held in trust solely to pay the pension obligations to retirees.
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