AIMCo Gains 2.5% in 2020

The Alberta Investment Management Corporation (AIMCo) released its 2020 Annual Report today. AIMCo issued a press release back in April going over its 2020 performance when it announced the appointment of Evan Siddall as Chief Executive Officer:

Despite the global economic impact of COVID-19, AIMCo earn a total fund return of 2.5% net of all fees, on behalf of its clients. Since inception, AIMCo has earned more than $70 billion in net investment income on behalf of its clients, contributing to the well-funded status of Alberta’s public sector pension plans and generating significant income for the Alberta Heritage Savings Trust Fund, the proceeds of which have benefited all Albertans.

“AIMCo is a long-term investor, in alignment with the objectives of our clients, and accordingly our performance is gauged by investment returns measured in decades, not years. Nevertheless, a year like 2020, where so many asset classes declined in near unison, erasing the typical benefits of well-diversified portfolios, is extremely humbling,” said Kevin Uebelein, Chief Executive Officer. “AIMCo has demonstrated complete transparency regarding investment performance in 2020. We undertook a comprehensive review of risk management and believe we are well-positioned going forward.”

In terms of asset class performance, public market investments continued to gain strength following the challenges of the first quarter in 2020. A broadening of the market rally favoured AIMCo’s approach in public equities, while Fixed Income also continued on the path of recovery, with steadily improving absolute returns and relative returns as well. Private Equity investments outperformed overall, while Infrastructure fared less well. Re-positioning the Real Estate portfolio toward industrial and logistics, should drive strong performance in the future, though office and retail were challenged in 2020 as a result of extensive COVID-related measures. Overall, for the one-year period ending December 31, 2020, AIMCo’s total fund return is 5.4% below that of its benchmark.

Detailed performance information will be available in AIMCo’s Annual Report to be released in June 2021.

Today, AIMCo released its 2020 Annual Report which you can read here.

I want to thank Dénes Németh, Vice President, Corporate Communications & Public Affairs, for sending me a copy of the Annual Report yesterday (on an embargoed basis) so I can go over it, and for arranging a call with Dale MacMaster, their CIO, where we went over the results.

My discussion with Dale was excellent and I will go over it below.

Before delving into that discussion, I'd like to go over the Annual Report starting with Chair Mark Wiseman's message on page 6:

Since its creation in 2008, the Alberta Investment Management Corporation Board of Directors has been solely focused on building an organization that can best serve the investment needs of its clients and one in which all Albertans can take considerable pride. And while the Board’s leadership and composition will inevitably evolve, that commitment to achieve enduring investment excellence has not once wavered.

There is no question 2020 was a year fraught with all manner of challenges that tested our collective resilience on many levels.

During this period, the Canadian model of public institutional investment management, globally recognized as the most effective means of ensuring sound and reliable investment performance, proved strong and sturdy once more.

Indeed, AIMCo had positive returns in calendar 2020, despite the challenges of the pandemic and previously disclosed investment losses related to a volatility trading strategy. Throughout, AIMCo’s Board worked closely with management to identify and execute upon the organization’s, our clients’, and Albertans’ highest priorities.

Chief among these priorities was the need to implement and fully-integrate appropriate risk management measures into investment processes. This delicate work entailed a dual focus on internal culture and process. The full benefits of this foundational work will be decisive over the long term, but clients and staff have already seen the benefits. Among these measures was the creation of an Enterprise Risk Management Committee of the Board, which was formally struck early in 2021.

As my first year on the Board and as Chair comes to a close, I am struck by a feeling of immense gratitude for the impressive cooperation and determination demonstrated through this period of unparalleled global turbulence.

Aside from the imperative for cooperation and resilience, the past year has also served to remind us of the importance of strong leadership. Continuing in the lineage of strong leaders, the Board and I are thrilled to welcome a new Chief Executive in Evan Siddall. In December of last year, the Board formed a search committee and identified a comprehensive shortlist of candidates from an impressive global talent pool. Evan stood out for his financial acumen and, crucially, for his ability to lead meaningful change across an organization, ensuring everyone is pulling firmly in the same direction to benefit our clients. His experience and leadership will position AIMCo for success in meeting and exceeding our clients’ needs in the years ahead.

Since joining the Board last July, I have learned much about our work and our fundamental commitments to our clients and stakeholders. In the face of adversity, Albertans have revealed a willingness to sacrifice and support one another in a way that is beyond admirable. Especially in times like these, AIMCo is both grateful and proud to serve its clients across the province with the benefits of scale as a top-tier global investment manager.

AIMCo is a long-term investor that prioritizes risk-adjusted returns managed with conviction. It is an approach that paid off in the past year. Scale is a meaningful advantage with our size allowing us to develop special in-house capabilities and provide access to asset classes and investment opportunities that others can only envy. It also ensures our ability to attract and retain the higher-caliber investment professionals necessary to effectively manage billions in assets, in a globally competitive industry.

While many Albertans may not know all the details of what AIMCo does, we never lose sight of the fact that they are the long-run beneficiaries of our dedication and service.

AIMCo is especially thankful to work with our clients, including those who make up Alberta’s world-class public retirement systems. Their unwavering commitment and enduring support for the independence and strong governance of our organization, will ensure the continued security of these pension plans into the future.

What’s more, we are proud of the fact that 90% of AIMCo’s 500 employees live in Alberta. Since joining the organization last year, I have witnessed first-hand the dedication and commitment of AIMCo’s team and the pride they take in serving the needs of our clients. It is an honour to work alongside them.

With the forthcoming CEO transition, I want to take a moment, on behalf of the Board of Directors, to express our gratitude to Kevin Uebelein for his six and a half years of service. Upon joining the organization, Kevin made it his commitment to strengthen client relationships and he has been an inspirational leader at AIMCo. Under his leadership, AIMCo was recognized for its commitment to responsible investment and sustainability. He has been a welcome and knowledgeable voice at peer meetings and an important presence in our industry. The Board and I wish him well and know that we will be able to count on his continued friendship and wisdom.

Exemplary governance requires a natural level of turnover at the board level, as well. Former directors Richard Bird (Chair) and Jay Vivian brought important perspective to the Board over two terms (six years) prior to retiring in 2020. The Board thanks them both for their service and leadership.

As we move ahead into a year that already looks much brighter for Canada and for Albertans, I feel optimistic about what we will achieve. AIMCo is resolutely focused on delivering for our clients and ensuring transparency in all we do. These twin pillars will guide us going forward as they have in the past.

For all the challenges of the past year and a half, AIMCo remains a shining example of the Canadian investment management model, delivering great returns through a sustainable, long-term approach. We have tremendous people on our team, remarkable leadership at the helm, and a very bright future ahead.

To AIMCo’s clients, we are proud of the work we do on your behalf. Our focus is on your future.

Next, I read CEO Kevin Uebelein's message on page 7:

Keeping the future in focus was perhaps the most effective strategy for navigating 2020, both from an investment perspective and in our day-to-day lives. Around the world, there is a shared grief for those we lost to COVID-19. Efforts to protect as many people as possible meant disruption to our routines and relationships. Healthcare workers shouldered responsibilities that — in light of the pandemic’s consequences — displayed truly heroic dedication. Other frontline workers stepped up too, to keep our store shelves stocked, our communities operating and students learning — virtually and in person.

From an investment perspective, this past year began with a crash in March, where there was no place for investors to hide and where AIMCo sorely underperformed for our clients. Less startling, but still important has been the very strong recovery of public markets since the lows experienced in March. At AIMCo, we saw improving returns for most Public Equities strategies by year end; and the return to outperformance has continued into the new year, as I write this letter. The losses we experienced earlier in 2020 were deeply damaging. In our performance reporting, the impact of multiple asset classes declining in near unison, will be apparent.

In confronting these results, we’ve attempted to demonstrate the highest degree of transparency with our clients. We undertook a comprehensive review of risk management and have made considerable progress on meaningful change in this area. That said, there is more work ahead to further shape AIMCo’s strategy in collaboration with clients, to ensure alignment of purpose and outcome.

It bears repeating that as an institutional investor, AIMCo is always focused on the long term. Since 2009, AIMCo has generated more than $70 billion in total net investment income. Historically, AIMCo has outperformed its benchmark in 9 of the last 12 years. We have been consistently independently rated a higher value-add and lower unit cost investment manager in comparison to institutional fund managers of a similar size.

While aspects of our 2020 performance cast a shadow upon our organization, we also have points of pride that deserve to be brought to light. Operationally, our shift to working from home could not have been executed any better. Prioritizing the health and safety of our employees and their families, as well as doing our part to limit the spread of COVID-19 in Edmonton, Toronto, London and Luxembourg was paramount. Additional measures to support our people through the stress of a pandemic led us to a level of mutual support and understanding that I have never before experienced in a workplace. Conversations about mental health and wellbeing became the new normal — and they happened in a virtual environment many of us thought we’d be unable to embrace.

AIMCo has taken an important step in advancing diversity, equity and inclusion (DEI) within the organization by way of a new DEI Strategy. Accelerating progress on diversity and inclusion at AIMCo requires a purposeful and collective effort and there are many contributing to this vital work.

AIMCo’s executive committee was bolstered by the addition of three new members. Amit Prakash joined us as Chief Investment Strategy Officer, Andrew Tambone stepped into the Chief Risk Officer role and Paul Langill has taken the reins as Chief Financial Officer. All three made an immediate impact in their areas of expertise.

As I move on from AIMCo, I would like to offer my best wishes to clients, board members and the many other stakeholders with whom I’ve had the privilege of working. To the team at AIMCo, it was an honour to serve as your CEO and I am most grateful for your dedication to our vision and values.

I actually wanted to talk to Kevin but he already transitioned out of AIMCo and despite the difficult year last year, he has much to be very proud of.

AIMCo's new CEO, Evan Siddall, will commence work next week and I'm sure he's looking forward to starting his new position and wish him much success as he takes over the helm of this important organization. 

Evan wrote a fantastic comment on Linkedin recently, Juneteenth ‘21: Inclusive Leadership Is An Act of Humility, where he discussed his views on the role of leaders to foster a more diverse and inclusive workplace. 

He ends it by stating:

The lesson is that those with power must share their good fortune with humility. While white men do not need to vacate our roles, we must expand our tables. Equity is not a special initiative and it’s not merely HR stuff. If we are to deliver on the promise of Canada, a multicultural country where we want all to feel welcome, we leaders have a moral imperative to share our power and influence so that everyone can feel they belong.

I love his comment and he's spot on, leaders have a moral imperative to share their power and influence so everyone can feel they belong. 

Back to the AIMCo's 2020 Annual Report.

In aggregate, AIMCo funds achieved a net return of 2.5% in 2020. AIMCo’s Balanced Fund clients, many of which capitalize on AIMCo’s full suite of investment capabilities, earned a net return of 2.6%, while Government & Specialty Funds earned a net return of 2.2% .

While AIMCo did manage a positive gain for the year, it underperformed its benchmark last year by 5.5%:

Most of that relative underperformance was concentrated in Public Markets (VOLTS blowup), Real Estate and Infrastructure:


In fact, here are the numbers for 2020:

  • Public Markets underperformed its benchmark by 390 basis points (6.4% vs 10.3%)
  • The underperformance in Public Markets was concentrated in Public Equities (3.7% vs 12.2%) where the volality strategy resided.
  • Illiquid Markets underperformed their benchmark by 910 basis points (-7.2% vs 2.3%)
  • The underperformance in illiquids came from Real Estate (-13.6% vs -2.6%), Infrastructure (-3.5% vs 6.1%) and Renewable Resources (-6% vs 6.1%). Private Equities also underperformed their benchmark marginally last year (7.2% vs 8.1%).
  • On a positive note, Money Markets and Fixed Income delivered solid gains last year, adding 50 basis points relative to benchmark (7.8% vs 7.3%).

Discussion with Dale MacMaster, CIO

As I stated at the top of this comment, I did get to discuss AIMCo's results with Dale MacMaster, CIO of AIMCo. I thank him for taking the time to call me earlier to discuss results in-depth.

There's actually a decent Q&A with Dale on pages 21 and 22 of the annual report:


I wanted to go beyond the Q&A and was fortunate enough to really get into it with Dale earlier today.

Below, some of the key points from our discussion:

  • From the $5 billion in relative value added lost last year, $2 billion came from VOLTS and another big chunk came from Real Estate and Infrastructure.
  • But AIMCo's portfolio has already bounced back big this year, adding $4 billion in value added as global economies and markets experienced a V-shaped recovery.
  • Dale put the $5 billion in relative value added lost in 2020 in proper context stating in a $118 billion fund, that was within value at risk (VaR) limit the fund can experience once every 20 years (95% confidence level).
  • Still, he said losing $2 billion in a single strategy (VOLTS) is unacceptable and emphasized "the way we lost it" hurt. He said they took full ownership, responsibility and accountability and were "rightly whipped" by their clients and the media.
  • He also said they implemented 20 of the 31 recommendations from the independent review of VOLTS and bolstered risk culture at the organization, looking at their risk partners, including HR in risk assessment of individuals and a lot more.
  • We spoke about governance and the respective role of the Chief Investment Strategy Officer, Amit Prakash, which I recently discussed here
  • Dale said it is based on the OTPP model where Barb Zvan was the Chief Risk Officer and recommended long-term portfolio construction, but what it really came down to is he's got a full plate overseeing 140 investment professionals and cannot interface with 32 AIMCo clients on a regular basis. "Amit handles client interfacing, advising them on long-term asset mix and researching (like emerging market bonds) and I handle TAA, security selection and implementing strategies including tail risk hedging." They obviously work closely together but the point is the Chief Investment Strategy Officer acts like a liaison with clients, the first point of contact.  
  • Concerning steep losses in Real Estate, Dale told me like other large funds, they got hit in offices and retail and did well in multi-family, industrials and logistics. He said they own three super-regional malls with OMERS (Square One, Yorkdale and Scarborough Town Centre) that are exceptional assets because of parking and public transit going there but "Covid turned that strategy on its head" as lockdowns hurt super-regional malls and favored smaller, independent malls with pharmacies and retail grocers.
  • In Infrastructure, they got hit on London City Airport which they also own with OMERS and OTPP as "capacity went from 95% to 5% so we took a 20% valuation cut on that asset." He told me renewables did fine last year.
  • As far as Private Equity, this year it's on fire, and doing exceptionally well.
  • Dale and I had an interesting discussion on total fund management and I alluded to my recent comment covering his counterpart at PSP, Eduard van Gelderen. Dale told me they do not have a complementary portfolio because they're still small and nimble and their existing products offer tremendous flexibility so they can fit all strategies and anything in between. "In Real Estate, they do listed and unlisted. Data centers are in real estate, infrastructure and private equity depending on the transaction. In Public Markets, we have L/S credit, reinsurance and other strategies."
  • Interestingly, on tactical asset allocation, he told me they never bet the farm on any asset class because that can swamp their security selection and underwriting alpha. "So, when March hit last year, we went overweight equities 3% but no more than that, respecting our risk budgets."
  • Lastly, I asked him what he thinks about all these interventionist policies from central banks and governments and what is the endgame. Dale told me he recently did a Board presentation on the endgame and admitted "normalizing rates in this environment is tough without causing major disruptions in markets." He said they reduced their overweight in equities (to 1% above LT target) and he's waiting to see whether inflation pressures subside (structural deflation still persists but there's cyclical inflation now which is stronger than ever).

Anyway, it was a great discussion, Dale is an incredible CIO,  I wish I did a podcast with him, he reminds me a lot of Neil Petroff, the former CIO at OTPP (another great CIO who really knew his stuff).

Anyway, take the time to read the 2020 Annual Report here, it provides a lot more details.

I think the big takeaway is they had a bad year but it was hardly a disastrous year, they did manage a positive gain, and they will bounce back strongly this year.

More importantly, we have to stop looking at one-year results, we need to focus on long-term results and in this regard, AIMCo is fine and performing solidly.

Still, 2020 did impact compensation and it is reflected in the summary compensation table below which is comprehensive and includes more senior managers than other funds publish:

Below, Mark Wiseman, chair at AIMCo and former CEO at CPPIB, joins BNN Bloomberg to discuss the path forward for Canada’s economic recovery. He believes government spending should be concentrated on physical and human investments to ensure success.

Earlier this year, Mark joined BNN Bloomberg to discuss how foreign investors are viewing the federal budget plans.Take the time to watch both clips, he offers great insights (watch here and here if it doesn't load below).

Alright, time to watch some hockey, Go Habs Go! Wish you all a Happy Canada Day!

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