Alberta Government Fires AIMCo's Board, CEO and Three Executives
Alberta’s government has fired the CEO and the entire board of Alberta Investment Management Corp. (AIMCo), citing a need “to restore confidence” in the provincial pension fund manager.
The provincial government dismissed the 10-member board as well as chief executive officer Evan Siddall, and said it plans “to reset the investment corporation’s focus,” starting with the appointment of a new board chair within 30 days, and an interim CEO within a days.
In the meantime, Minister of Finance Nate Horner will be AIMCo’s sole director and board chair, but will not make investment decicions or receive any pay for those roles. “All board appointments have been rescinded and a new board will be established after a permanent chair is named,” the government said in a news release on Thursday.
Mr. Horner also told reporters he relieved Mr. Siddall of his duties, and let three other unnamed executives go. He called out a sharp increase in third-party management fees, expanded staffing and higher wage and benefits costs, “without a corresponding increase to return on investment.”
“It’s something we’ve been monitoring with concern for a while,” Mr. Horner said. “It was my determination it wasn’t going to change without a major reset.”
Spokespeople for AIMCo did not immediately respond to requests for comment, and Mr. Siddall could not immediately be reached for comment.
The widespread changes at AIMCo were sudden and surprising. On Wednesday night, Mr. Siddall, AIMCo’s chief fiduciary management officer Amit Prakash and provincial government officials were together at a public meeting, with no outward sign of any tensions.
AIMCo manages $169-billion in public pension plans and endowments, including the province’s $23.4-billion Heritage Savings Trust Fund. The dramatic shakeup comes roughly six weeks after AIMCo announced its chief investment officer, Marlene Puffer, was departing after less than two years on the job.
AIMCo has been without a permanent board chair since January, when former chair Mark Wiseman stepped down after a three-year turnaround. Since the start of the year, Kenneth F. Kroner has served as interim chair of AIMCo’s board.
At the end of June, AIMCo reported an average investment return of 8 per cent over the past four years, and 7.2 per cent over the past decade. Those returns are comparable to the rates of return earned by several other large Canadian pension funds. But Alberta’s government noted that its costs were up 29 per cent over four years, in step with staffing levels.
The outspoken Mr. Siddall took the helm in July, 2021, after his tenure as CEO of the Canada Mortgage and Housing Corp. His entry followed a period of upheaval at AIMCo sparked by a $2.1-billion investment loss at the start of the pandemic on volatility-linked instruments, when markets gyrated wildly. An internal review into the losses found that the organization suffered from a poor approach to risk management as well as insufficient oversight.
AIMCo was structured to be an arm’s-length investment manager, but has been under increasing political pressure in recent years. In 2019, former UCP Premier Jason Kenney’s government passed legislation to put the previously independent Alberta Teachers Association pension plan under AIMCo’s umbrella. The ATA was staunchly against the move, arguing that its own long-time manager had provided above-average returns for retirees.
“We continue to work through, have conversations with the board, expressing our displeasure with things, or let them know where we think that they’re doing well,” Mr. Horner said. “But sometimes you just need a clean slate.”
As one of his first moves as CEO, Mr. Siddall agreed to give the teachers say in how their investments would be managed, defusing a major source of tension between Mr. Kenney and the province’s well-organized teachers.
Mr. Siddall also made major changes to the organization and its executive team, revamping its risk management and technology, and opened new offices in New York and Singapore to expand its reach and expertise in global investment markets.
Since before her election in 2023, Premier Danielle Smith has pushed for Alberta to exit the Canada Pension Plan and set up its own provincial plan, with AIMCo as a possible manager. The proposal is controversial, and has so far failed to gain widespread support within the province.
Mathew Black of the Edmonton Journal also reports on the province sacking AIMCo board and the finance minister taking over:
The Alberta government has sacked all 10 board members of the Alberta Investment Management Corporation (AIMCo) as well as its chief executive officer, citing low investment returns and rising operating costs, management fees, and staffing.
The province made the announcement Thursday, saying it decided to “reset” AIMCo’s focus, adding that Finance Minister Nate Horner has been temporarily appointed as the Crown corporation’s sole director and chair, effective immediately.
“It’s something we’ve been monitoring with concern for a while,” Horner told reporters inside the legislature Thursday.
“We’ve been watching this closely and it was my determination it wasn’t going to change without a major reset.”
Horner said his major concern was expenses, including salaries that can exceed one million dollars, that he noted were “borne by all (AIMCo’s) clients, Albertans in general and the pensions (AIMCo) represents.
“They’re going to have to look at their cost trajectory and structure,” he said, adding the decision was made after a meeting Wednesday night.
“I am going to offer a challenge to the new board chair around costs, and I would expect that challenge would be applied on the executive level as well.”
He said AIMCo’s clients were not informed in advance of the changes, citing legal considerations.
Opposition finance critic Court Ellingson told reporters inside the legislature that the shake-up is evidence of government incompetence.
“If they’ve been monitoring this for a while, they had many opportunities to do something that was not so drastic and earth-shattering as today’s move,” he said warning of the wider implication, including for 375,000 public-sector employees whose pension assets are managed by AIMCo.
“Investors will now question what other decisions will this government make.”
Rising fees
The province said AIMCo’s third-party management fees had nearly doubled between 2019 and 2023 while the number of employees grew by 29 per cent and salary, wage and benefits costs grew by 71 per cent.
Those increases came while AIMCo also managed a smaller percentage of funds internally, down by 18 per cent over the four years, according to figures provided by the finance ministry.
Horner said he relieved CEO Evan Siddall from his duties earlier Thursday and said he expects an interim CEO to be appointed in a matter of days.
A new board chair is also set to be appointed within 30 days after which new board members will be named, with all current appointments now having been rescinded.
“I would like the new board chair that comes in to have a clean slate,” Horner said of the firings.
While he is in charge in the interim, Horner will not make investment decisions or be compensated for the job, the province says.
Ellingson said he was skeptical of that, calling it “an unprecedented move” to have the minister take over.
“It’s very difficult for us to believe that even in a 30-day time span there will not be decisions that are made in the category of tens or hundreds of millions of dollars.”
Horner said the move is unrelated to the province’s push for a provincial pension plan. He told reporters last week he had written to the office of the chief actuary to see when its estimate on Alberta’s potential withdrawal from the CPP would be published. His office said Thursday it has yet to receive a reply.
Mixed returns
From 2019 to 2023, AIMCo’s total fund return averaged 7.62 per cent annually, according to the province’s figures.
In 2023, it posted an overall return of 6.9 per cent, less than its benchmark return of 8.7 per cent.
The agency noted challenges in its real estate portfolio, which was down 8.4 per cent at the end of last year, while ending 2023 with $160.6 billion in assets under management.
The AIMCo board is responsible for overseeing how the corporation handles its business affairs.
Among those removed are former UCP leadership candidate Jon Horsman who was appointed in April of last year.
The board most recently appointed two members in March of this year.
It’s the third board the government has removed in the last two years along with that of Alberta Health Services in November 2022 and the board of the Banff Centre for Arts and Creativity in October of last year.
Matt Scace of the Calgary Herald also reports Alberta government dismisses AIMCo board, CEO, citing underperformance:
The Alberta government on Thursday dismissed the CEO and board at the Alberta Investment Management Corporation (AIMCo), citing displeasure with increasingly high costs and reliance on third parties.
Three other executives have also departed the provincial pension fund, Finance Minister Nate Horner confirmed Thursday afternoon.
The changes were made to restore trust in the Edmonton-based Crown corporation and institutional investor responsible for managing several public funds and pensions, the province said. AIMCo has seen significant increases in operating costs and fees alongside returns on investment that have not corresponded with the cost increases, the province added.
In doing so, the province has appointed Horner as AIMCo’s interim board chair until an appointment is made in 30 days. The rest of the 10-person board will be named after the new chair is selected, the province said.
“It seemed like it needed a reset and that’s what we did today,” Horner told reporters in Edmonton.
Horner will not make investment decisions nor receive compensation from AIMCo while he chairs the fund.
In a Thursday news release, the province cited a decreasing percentage of funds being managed internally, going from 82 per cent in 2019 to 67 per cent in 2023 — a decrease of 15 percentage points.
AIMCo’s salaries, wages and benefit costs have increased over that four-year period from $129.7 million to $222.3 million. The public pension fund manager has averaged 7.62 per cent annual returns since 2019.
Interim CEO to be named ‘in a matter of days’
The major shakeup comes less than a year after Kenneth Kroner assumed the role of board chair until the province announced a permanent appointment. The province has been searching for a new chair since Mark Wiseman stepped down at the end of 2023.
Kroner had previously been chair of AIMCo’s investment committee beginning in 2017. Prior to that, he was senior managing director at Blackrock Inc., the world’s largest asset manager.
Horner said now-former CEO Evan Siddall was relieved of his duties earlier on Thursday.
Siddall’s interim replacement will be named “in a matter of days,” he said.
Siddall was appointed CEO of AIMCo in July 2021 after seven years serving as president and CEO of the Canada Mortgage and Housing Corporation. He has also served as special advisor to the governor of the Bank of Canada.
The now-former AIMCo CEO took over the fund after a major leadership overhaul in 2021 following major losses from a volatility-trading program. AIMCo lost $2.1 billion in 2020 on a program called VOLTS that traded market volatility, which crashed in the wake of the COVID-19 pandemic and led the fund to end the program and launch a review.
Siddall declined Postmedia’s request for comment.
It’s expected the interim CEO will be named in about a week, likely coming from outside the organization.
Horner to take on ‘caretaker role’
Justin Brattinga, press secretary to the Alberta finance minister, said Horner will be fulfilling a “caretaker role” until the new board chair is appointed.
“It may seem like a lot today, but we’ve been watching this closely and it was my determination (that) it wasn’t going to change without a major reset,” Horner said.
AIMCo is responsible for managing the Alberta Heritage Savings Trust Fund, which has gained renewed interest in the current government. Alberta Premier Danielle Smith has said she wishes to bring the fund from its current $25-billion value to anywhere between $250 to $400 billion by 2050, a strategy the province believes would eventually protect Alberta from major oscillations in oil and gas revenues.
The province will have “more to say” about the Heritage Fund rollout before Christmas, Horner said.
And Madeline Smith of CBC News reports Alberta government fires AIMCo board to 'reset' pension management fund:
The provincial government has removed the entire board of the Alberta Investment Management Corporation (AIMCo).
In a statement Thursday afternoon, the province said it has decided to "reset" the focus of the provincial corporation, and will be appointing a new board chair within 30 days.
AIMCo manages more than $160 billion in assets, according to its most recent annual report.
It is responsible for the investments of several provincial government funds, including the Heritage Savings Trust Fund. It also invests money from the pension funds of hundreds of thousands of Alberta public sector workers.
For now, Finance Minister Nate Horner has been appointed the sole director and chair for AIMCo, according to the province.
The appointments of 10 members of the AIMCo board of directors were rescinded in an order-in-council Thursday.
The same order-in-council appointed Horner the board's chair for a term to expire Sept. 30, 2025.
The province's statement says the move comes "after years of AIMCo consistently failing to meet its mandated benchmark returns."
The government also pointed to "significant" increases in operating costs, management fees and staffing without corresponding return on investment.
Horner will not make any investment decisions or receive compensation in his temporary role at AIMCo, the province said.
AIMCo acts as an investment manager for pension plans for Alberta teachers, municipal police officers, academic and professional staff at universities and municipal and provincial public servants, among others.
The United Conservative Party government, under former premier Jason Kenney, passed a bill in 2019 requiring the Alberta Teachers' Retirement Fund to use AIMCo as its investment manager.
The bill also required three large public sector pension plans to use only AIMCo as their investment manager.
In 2020, AIMCo announced a bet on market volatility led to a loss of $2.1 billion.
In the aftermath of that loss, CEO Kevin Uebelein, who had been at the helm since 2014, said he would leave the organization by June 2021. Evan Siddall replaced him as CEO shortly after.
Let me begin by stating I learned the news late this afternoon as I was getting my haircut and was beyond shocked.
This is the equivalent of nuclear bomb going off at a major public pension fund in Canada, and let me assure you everyone at Canada's mighty Maple Eight is paying attention because what is going in Alberta can easily happen elsewhere.
Let me be blunt: the much touted governance model that the Maple Eight boast as making them the envy of the world has just received a major blow, not a death blow but it is one for AIMCo.
And it's coming from a Conservative government led by a very popular premier who I've grown to be very fond of on LinkedIn, minus the silliness of Alberta leaving the Canada Pension Plan (it's never going to happen).
And while I'm not saying other provinces are going to take similar drastic steps, this move from Alberta's government is definitely sending shock waves across Canada's large public pension funds (not just the Maple Eight but others too).
Why? Well, let's just say politicians talk to each other and if you think Nate Horner's counterparts in other provinces aren't going to ask questions and look into how their own public pension funds are faring and what value they are getting for the money they're spending, then you aren't politically astute.
Now, is this the right decision? I'm not privy to everything the Government of Alberta is privy to but I can tell you by reading these articles, they decided enough is enough, fire the entire board of directors, the CEO and some executives and start with a 'clean slate' for a 'major reset'.
Read between the lines, a major reset in compensation is what Nate Horner is getting at and that is a death blow to the arm's length governance model at AIMCo.
What's going to happen in Alberta is the finance minister is going to select a new chair of the board at AIMCo with explicit instructions to reduce costs, meaning fire staff, close offices and set strict limits on compensation.
They may even take Andrew Coyne's bonehead advice and index everything to the S&P 500 (with concentration risk at historic highs) and just fire everyone at AIMCo.
I'm being facetious but after today nothing will surprise me, a nuclear bomb just went off at Alberta's public pension fund and if I was part of Alberta's public service, I'd be very concerned.
I'd be even more concerned if I was working at AIMCo.
Already morale was low after CIO Marlene Puffer was dismissed in late September, I can imagine how it will be tomorrow and in the days and weeks ahead.
There are a lot of good people working at AIMCo. Say what you want about Evan Siddall, he did manage to attract top talent to the organization and nurtured the right culture there at all levels.
With this latest development, I fear top talent will leave AIMCo (if they can, not that easy) and a lot of other employees will be living in fear wondering what lies ahead.
Not exactly the best thing for a public pension fund with huge responsibilities, entrusted to safeguard the public pensions of Alberta's civil servants.
And let me take some issue with this:
In a Thursday news release, the province cited a decreasing percentage of funds being managed internally, going from 82 per cent in 2019 to 67 per cent in 2023 — a decrease of 15 percentage points.
AIMCo’s salaries, wages and benefit costs have increased over that four-year period from $129.7 million to $222.3 million. The public pension fund manager has averaged 7.62 per cent annual returns since 2019.
Compensation at AIMCo was in line with its large peers. The problems in performance are in offices in real estate which is a drag on performance at all of Canada's large pension funds.
Salaries increased because the strategy shifted focus to invest more private markets and that means you need to attract qualified people to co-invest with top strategic partners to reduce fee drag.
AIMCo was late to shift more assets into private markets, still has a relatively higher exposure to public markets than its larger Canadian peers, but the strategy of shifting more to private markets makes absolute sense over the long run if you implement the right approach, which AIMCo did.
Moreover, $222 million in salaries as a percentage of $169 billion in assets under management is peanuts, but people are just looking at executive compensation without thinking clearly and putting it into proper context.
I'm not saying that executives at AIMCo and other large Canadian pension funds aren't well paid -- they most certainly are -- but they are producing the returns over the long run and their compensation is tied to long-term performance.
I know, the stock market is on fire, just take Coyne's advice and index everything to the S&P 500 and fire all of Canada's large public pension fund managers, they're totally useless and way overpaid for the results they produce.
There is a serious communication problem going on and I fear we are going to learn the hard way when markets unravel and a tsunami hits us.
Also, members of AIMCo and the public in Alberta should be aware that it's going to cost the government millions in severance packages as they carry out this 'major reset'.
This information should be made publicly available in AIMCo's next annual report which I'm sure it will be.
If I was advising Nate Horner and Alberta's government, which I'm not, I'd tell them to proceed cautiously here and really think hard about what is in the best long-term interest of members and the province.
AIMCo was far from being a disaster, even back in 2020 with the big volatility blowup, so I'm not sure what prompted the government to take such a drastic decision at this time and to be frank, it will likely blow up in their face on many fronts (can you imagine what AIMCo's strategic partners are thinking right now?).
Mr. Horner is going to "reset the focus", not sure the end result will leave AIMCo better off five, ten or twenty years from now.
And the timing of this announcement with market and geopolitical risks rising, couldn't be worse.
Lastly I did reach out to AIMCo board member Jim Keohane but he can't discuss this matter right now which is understandable.
As far as Evan Siddall, never met the man but we had something in common, he has Parkinson's Disease and I have Multiple Sclerosis and we both underwent spinal fusion surgery recently.
Evan is an advocate for Parkinson's and he has raised awareness and funds for research through the Growling Beaver.
I hardly ever correspond with him but I did send him an email a few days ago to inform him of a new treatment for Parkinson's that also looks promising for MS patients.
I leave you with President Biden's speech from earlier today, one of his best where he stated this:
“Setbacks are unavoidable, but giving up is unforgivable. We all get knocked down, but the measure of our character, as my dad would say, is how quickly we get back up. Remember, a defeat does not mean we are defeated. We lost this battle. The America of your dreams is calling for you to get back up. That’s the story of America for over 240 years and counting. It’s a story for all of us, not just some of us. The American experiment endures. We’re going to be okay, but we need to stay engaged.”
Remember those wise words and always stay engaged!!
Update: As you can imagine, this comment was viewed by thousands of people and generated some feedback worth mentioning here.
First, Senator Clement Gignac wrote an interesting comment on LinkedIn here and shared his take:
All Canadian public pension funds should take notice and realize that political independence does not mean absence of public accountability!
In the meantime, we are still waiting for an upcoming report from former BoC governor, Stephen Poloz about public pension funds! His mandate will be about investment policies and geographical diversification of the big " Maple 8" rather than disclosure policy and public accountability.
Time will tell if other provincial and federal politicians will ask for more scrutiny and disclosure from other public pension funds regarding their own operating costs and compensation policy.
A pension expert told me that he thinks what happened is when Mark Wiseman became chair, he decided to shift AIMCo’s strategy more to the CPP Investments’ model to open up offices all over the world and make significant co-investments alongside strategic partners.
He thinks another model is the endowment model where you index a lot of public markets and take minority co-investments where you don’t have as much governance rights and need a much smaller staff.
He’s not advocating for this but saying there are other models than the CPP Investments model and AIMCo can explore them.
But he also agrees with me that the governance model at AIMCo has been shattered and it will be harder to attract and retain top talent there.
Lastly, a friend who understands Crown corps well shared this with me:
I don’t understand your logic. Who is the Board accountable to? The contributors. And who represents the contributors, the Government. If the Board is not performing or ignoring the Government, out they go. These guys hide behind process way too much.
Governance is a means to an end. It is pretty clear to me that AIMCo’s Board and Management failed in their objective of outperformance. Given the manner they were dismissed, I would also say they failed miserably in managing the relationship with their only shareholder (and they got fired as a consequence).
He may be right about mismanaging communication but he misses the point that the Board must operate at arm’s length from the government and do what is in the best long-term interest of members.
By nuking this governance model, the government of Alberta is basically going to turn AIMCo into a place which attracts civil servants and the long term performance will suffer.
Update #2: Jordan Fleguel of BNN Bloomberg reports AIMCo board firing comes as fund has ‘a lot of unhappy clients’:
The Alberta government’s sudden decision to dismiss the entire board and CEO of the Alberta Investment Management Corp. (AIMCo) comes at a time when a number of the pension fund’s clients are “unhappy,” according to a business columnist with The Globe and Mail.
“I’m not actually completely surprised by this,” Andrew Willis told BNN Bloomberg’s Amber Kanwar in an interview Friday morning.
“AIMCo has been controversial for a couple of years and their performance hasn’t been that great… there is an underlying reason for this rather abrupt action from the government and it’s to do with the ability to keep these clients happy – there is a lot of unhappy clients at AIMCo.”
Willis said that what makes AIMCo unique as a fund is its structure as a crown corporation that manages capital for more than a dozen different groups in Alberta.
“That includes the heritage fund, but it also includes a number of different public sector pension plans,” he explained.
“The university professors in Alberta, for example, AIMCo runs their money, and over the last few years, those professors have been complaining about performance and they’ve been withdrawing their funds from AIMCo and giving them to other outside managers.”
In a statement on Thursday, the province’s Finance Minister Nate Horner said the decision to fire the fund’s board came down to management fees that were too high and a consistent failure to meet benchmark returns.
The Canadian Press reported on Thursday that Horner told reporters following the announcement that he had been watching AIMCo’s performance closely for some time and determined that necessary changes to the fund weren’t going to happen without a “major reset.”
Willis said that despite the government’s suggestion that the fund has been underperforming, their recent returns, though not outstanding, have been on par with most other large Canadian pension plans.
“There wasn’t a complete outlier in performance, they weren’t ahead of anybody else… but they certainly weren’t laggers,” he said.
AIMCo had encountered some setbacks in recent years related to volatility during the pandemic, Willis noted, but he said the fund’s management, led by chief executive officer Evan Siddall, had created a “credible turnaround plan” to resolve those issues.
“Their costs have been rising, they’re staffing up, they want to do more global investing, they want to get into more alternatives – that takes people, so that’s why the headcount was rising, and that’s one of the things that’s upset the government,” he said.
Ray Gilmour named interim CEO
Horner will act as AIMCo’s sole director and chair for the time being until a new chair is appointed, which the Alberta government says will happen within 30 days. The province has also appointed an interim CEO: Deputy Minister of Executive Council Ray Gilmour.
Willis said that Gilmour has “no investment management experience,” but is “clearly a trusted pair of hands” within the Alberta government.
He added that aside from who will ultimately run the fund, the biggest question AIMCo faces going forward relates to its mandate.
“Danielle Smith, the premier of Alberta has made it clear she wants to see more investment in Alberta from public money. She made the bid to get Alberta’s share of the Canada Pension Plan (CPP) managed in Alberta too,” Willis said.
“So, Danielle Smith I think looks at AIMCo as a bit of a cookie jar. The mandate that I think they might go to is something like what you’ve got in Quebec with the (Caisse de dépôt et placement), where there’s a mandate to primarily invest in Alberta, and I think that would be really dangerous.”
Alberta is Canada’s largest oil and gas producer, and while the province has made inroads in diversifying its economy in recent years, Willis said “there’s only one big industry, and it’s fossil fuels.”
“So, if you’re overweighting towards that industry, that’s a dangerous thing for Alberta pensioners,” he said.
A couple of quick remarks. First, to all those university professors who withdrew funds from AIMCo (didn't even know that was possible), how much are you paying in management fees and who will be tracking long-term performance of your money managers relative to that of AIMCo on a risk-adjusted basis?
Second, appointing Deputy Minister of Executive Council Ray Gilmour as interim CEO and possibly full-time CEO speaks volumes, they are turning the place into an extension of the civil service and that is the downfall of AIMCo (I mean it). Mr. Gilmour has no investment experience and is put there to cut costs and force the pension to invest more in Alberta.
That brings me to my third point, and here I agree with Andrew Willis who did a great job in this interview highlighting important points. It would be a completely bonehead move to force AIMCo to invest more in Alberta or adopt a CDPQ dual mandate in Alberta.
Why? AIMCo already invests extensively in Alberta but more importantly, their number one industry is oil & gas so they should be doing more of what Norges Bank Investment Management is doing and invest outside their province to properly diversify their retirement savings across public and private markets all over the world.
Everything I stated yesterday is happening at warp speed, I feel sorry for employees at AIMCo, what a depressing turn of events, just terrible for the organization that was on the right long-term course.
Again, if Mr. Horner or Premier Danielle Smith reads this, please contact me, you're not going about this the right way at all.
I embedded the interview with Andrew Willis below, take the time to watch it.
Update #3: Read my comment from November 11th, What's Really Behind the Purge At AIMCo?.
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