Note to readers:
Updated 21 October 2024
On 6 November the Standing Committee on the Alberta Heritage Savings Trust Fund (AHSTF) will be holding its annual public meeting at 6:30 p.m. in the Rocky Mountain Room, 2nd Floor of the Queen Elizabeth II Building in Edmonton. The annual public meeting is open to members of the public either in person or via social media including Facebook. I attended the last two meetings in person and have been able to raise important questions of policy. In the 2022 meeting (transcript here), I was the only member of the public present in person. In 2023, I was pleased that there were nine members of the public raising uncomfortable questions which generally were deflected by officials of Alberta Treasury Board and Finance (TBF) and senior Alberta Investment Management Corporation (AIMCo) executives (2023 transcript here). Given the importance of the Heritage Fund to the finances of the province, and given the major changes to the Fund initiated by the Smith government, principally changes to allow the reinvestment of the investment income of the Fund, it is vital that members of the public show up to learn more about the operations of the fund. Hopefully some of my subscribers will show up in person or via other means to watch the proceedings.
The purpose of this and successive posts is to draw attention to the secrecy which permeates the investment activities of over $20-billion of public moneys. Part 1 will examine the limited history of detailed disclosure of AHSTF investments and the 2023 public meeting’s discussion of the need for better disclosure for the thousands of investments held by the Fund. Part 2 will examine the performance of AIMCo since it was set up, drawing upon public disclosure and in particular the creation and performance of the Alberta Growth Fund and the 2020 Volatile Trading Strategy debacle. Part then looks at the case for increasing public disclosure of the fund’s investments and the case for limiting disclosure. I conclude by reprising recommendations contained in my 2022 Parkland Institute paper Can AIMCo be Fixed?
Background
In 2011, Alberta Finance and Enterprise, the predecessor organization to Alberta Treasury Board and Finance published a detailed list of investments of the Alberta Heritage Savings Trust Fund. The list was not audited by the Auditor General but gave a detailed account of what the new Alberta Investment Management Corporation was doing in terms of investment strategy with the Heritage Fund. At the time of the release, Lloyd Snelgrove was the Minister of Finance and Enterprise and Allison Redford was the Premier.
The following charts show the broad breakdown of investments in March 2011 and June 2024.
AHSTF detailed list of investments breakdownAHSTF detailed list of investments breakdown2024
The investment categories are similar, and the distribution of assets is not materially different between these dates. More exposure to private equity is seen, consistent with industry trends.
The 2011 report was comprised of 12 appendices under three broad investment categories: interest bearing securities; equities; and inflation sensitive and alternative investments. The 103-page report listed all the securities held by AIMCo on behalf of the AHSTF. The report is retrievable on line. However, no updates have been provided since.
Detailed lists of investments give the reader a granular feel for the types of industries and companies public moneys are supporting. A detailed list allows the reader to see under each category the largest investments. To the government’s credit AHSTF reports do show the biggest holdings in equities, timberlands, renewable resources, infrastructure and real estate, and the Fund’s overall exposure to Alberta-based investments. However, given that the AHSTF is only a small portion of the total assets it manages and that many investments are made jointly with public sector pension funds like the Local Authorities Pension Fund, Albertans do not have a consolidated understanding of AIMCo’s total holdings. Given the importance of AIMCo’s investment performance to hundreds of thousands of Alberta pensioners, a more fulsome understanding of the $120 billion it manages of provincial pension funds is essential. AIMCo’s annual report provides an overview of its $154-billion in assets at 31 December 2023, but does not provide details of its top equity, real estate, etc. holdings.
What officials say
Judging by TBF officials’ responses at last year’s AHSTF public meeting, the current position is no greater public disclosure is necessary because disclosure would be economically harmful.
Member Kayande: So we have heard tonight, for sure, more requests for greater transparency on investments and disclosures. Is there analysis that you’ve done or that you’re willing to do on how the heritage savings trust fund investment disclosure differs from those who are known to be best in class? I’m thinking about CalPERS, for example, where you know everything that they’re invested in, including, you know, the various different GPs and LPs. Has that been proposed, or has that been contemplated? Is that something you’re willing to do?
Mr. Epp: It’s been discussed, and the government, working with AIMCo, has decided that the portfolio’s returns could be harmed if it was live information. Now, other parties have made a different decision, but that reflects the discussion that’s happened.
Member Kayande: So is it a political discussion, or is it an administrative discussion? I mean, CalPERS has clearly decided that the harms that they suffer, if any, are less than the benefits that they gain from providing that disclosure. It’s certainly not real time, but there is very, very – what’s the word? It’s very clear, and there’s a lot of it.
Mr. Epp: It’s not a political discussion; I can assure you of that. It’s purely economic.
Member Kayande: So do you have analysis, then, that you could provide us on what the trade-offs are?
Mr. Epp: No, we do not. (HS, 30 November 2023, p. HS32- emphasis added.)
It is revealing how the senior Alberta public servant deflected this question. Rather than giving concrete examples where “live information” would be “harmful,” he dredged up the old canard as to whether the decision was “political” or not. Without the minister present, as is the tradition, MLAs must rely on a senior officials’ call on the “politics” of the matter.
Second, the senior official failed to answer Kayande’s question or offer any background as to why in 2011, the finance minister decided to provide all the details of the Heritage Fund’s holdings and the policy was quickly discontinued. What capital market conditions had changed to make “live” information so harmful? In any event, the information provided by AHSTF in 2011 was not “live” but about three months old.
Third, as mentioned by Kayande, CalPers, the California state pension fund ( $USD 465.9 billion in assets as at 30 June 2023), lists all its investments including derivatives in its 309- page report . Another major state institutional investor, the Norges Bank Investment Management also provides access to the public on all its investments. The Norwegian pension fund whose income derives, like the AHSTF from resource revenue and reinvested earnings, has a market value of approximately USD $1.9-trillion. The detailed list of investments in over 8,700 companies is updated every six months. 
In Canada, the $650-billion Canada Pension Plan Investment Board makes available a list of investments including public and private equities and real estate holdings. These massive funds are presumably the funds referenced by TBF that have made other decisions on transparency.
Unlike the CPPIB, the $452-billion Caisse de Depot et Placement du Québec does not publish a detailed listing but, like all institutional investor with U.S. dollar holdings, they are required to file a detailed report every quarter with the Securities and Exchange Commission. In Canada, securities law is under provincial jurisdiction and provinces could require disclosure but they have given provincial pension plans a non-disclosure pass.
Fourth, during last year’s AHSTF public meeting, AIMCo officials the then Chief Investment Officer (CIO) Marlene Puffer and Chief Risk Officer (CRO) Suzanne Akers in response to specific questions about their investee companies supplying services and weapons to the Israeli Defence Forces, replied
Dr. Puffer: The events that are happening in the Middle East at this time are tragic. You know, those events are not under our control, but we absolutely take seriously the points you raise. We operate with a global investment portfolio where we invest across the world in order to achieve diversification of the portfolio to benefit Albertans so that there is strong diversification across the asset classes according to the asset mix, that was mentioned earlier. We implement that through a very prudent approach. We operate according to our responsible investing policies and procedures (HS, 30 November 2023, p. HS22. emphasis added).
Instead of answering Ms. Khan’s direct question, the CIO resorted to standard investment speak declaiming prudence, diversification, “responsible investment practices,” and the now largely discredited investment fad “environmental, social and governance (ESG) “investing. In concluding this bit of obfuscation, she exculpated AIMCO by hiding behind AIMCo’s investment policies. In sum, if it’s consistent with the investment policy, it’s ok.
Responding to another question about investments damaging to indigenous peoples, Akers claimed “we don’t have exposure to companies operating in that sphere” (HS, 30 November 2023, p. HS 23.) Evidently Akers didn’t know AIMCo held shares in both Imperial Oil and parent Exxon Mobil, key players in the leakage of tailings ponds at its Kearl Lake facility. This lack of knowledge of AIMCo’s investments is breathtaking and brings into question how prudent the corporation’s ESG credentials are. Is it unreasonable to ask why the government of Alberta’s sovereign wealth fund is investing in shares of energy companies that are continuously poisoning waters which aboriginal communities depend on for drinking water and fishing? Is the Alberta government so beholden to the oilsands interests that the health and well-being of its citizens are subrogated to wanton environmental contamination- contamination that was un-reported for months?
More to come…
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