Status of Alberta's nest egg Heritage Savings Fund unknown as annual report stalled

As some MLAs prepare to consider a private members' bill on pension control on Monday, the Opposition says the Alberta government is withholding a key report that could shape their decisions.

According to law, an all-party committee of the legislature is supposed to discuss and release the annual report of the Heritage Savings Trust Fund by June 30 each year. A committee meeting scheduled for last week was cancelled and the report remains secret.

The fund is managed by the Alberta Investment Management Corporation (AIMCo), a Crown corporation that is also required to invest tens of billions of dollars held by major public sector pension plans.

Although many investment funds have had a rough ride during the COVID-19 pandemic and concurrent crash in global oil prices, AIMCo is under scrutiny after losing $2.1 billion on a single investment strategy earlier this year.

The Opposition NDP is accusing the United Conservative Party government of playing politics by delaying release of the latest report on Alberta's $18-billion long-term savings fund.

David Eggen, an NDP MLA who is on the committee and has seen a confidential copy of the report said it's "not good."

Christina Gray, also an NDP MLA, is seeking to reverse government changes to pension plans with her private members bill, Bill 203, the Pension Protection Act.

"I think Albertans deserve to have the facts on AIMCo's recent performance before MLAs are voting on whether the pension protection act should proceed or not," Gray said on Friday. "I think this information will be really pertinent to the discussion."

The government says the COVID-19 pandemic is responsible for the report's delay.

Pension changes controversial

Last year, the government passed an omnibus bill that included changes to the pension plans of more than 400,000 public sector workers.

The legislation requires that AIMCo must manage the investments of three major pension plans for police officers, municipal employees, health-care workers and many others.

It also requires the Alberta Teachers' Retirement Fund to start using AIMCo as investment manager by the end of 2021.

The legislation also changed the vetting process for pension board members and the composition of one board.

Gray's bill seeks to reverse all those changes. Bill 203 would also prevent the Alberta government from pulling out of the Canada Pension Plan (CPP).

The government is currently studying the case for pulling out of CPP and creating an Alberta pension plan in the wake of recommendations from the Fair Deal panel. Premier Jason Kenney has also said Alberta will hold a referendum on the issue if the study suggests it's a sage move.

Gray said MLAs have been deluged with emails and calls from people who oppose leaving CPP and disagree with the other pension changes, which they say were done without warning or consultation.

On Monday, an all-party committee that considers private members' bills will hear from stakeholders selected by the government and Opposition. The committee, which is dominated by UCP members, has the power to recommend whether or not the legislature should debate the bill or disregard it.

Heritage trust fund affects money for public services

Gray said members should have more insight into how AIMCo's other investment activities are going when they consider her bill.

The $47-billion Local Authorities Pension Plan, the largest one invested by AIMCo, has already reported the corporation lost $5.1 billion of the fund's value in the first quarter of 2020.

AIMCo's board has since hired a consultant to conduct an external review. Last week, AIMCo spokesperson Denes Nemeth also said executive vice-president of public equities, Peter Pontikes, and David Triska, portfolio manager of public equities, had both left the company. He wouldn't say whether their departures were connected to recent losses.

AIMCo has yet to release its annual report for 2019, which its website said it would publish in June.

Jerrica Goodwin, press secretary for Finance Minister Travis Toews, said Friday AIMCo operates independently from government.

"We are facing unprecedented times and these are challenging market conditions for all investors," she said in a statement. "It's anticipated that all institutional investors will have some tough quarters due to the economic effects of the pandemic."

The effect of AIMCo's troubles on Alberta's long-term nest egg, the Heritage Savings Trust, are yet unknown.

The 44-year-old fund, which was last valued at $18 billion, generates investment income that has supplied $43.5 billion for provincial services and infrastructure during the last four decades. This fiscal year, the government expects to spend $2.6 billion in interest.

Trevor Tombe, an economics professor at the University of Calgary, said a big loss from the fund is a problem, because it can permanently deplete its value while costs rise with inflation.

"It's not something, of course, we should panic over," he said on Friday. "But it is something that should concern Albertans, because payouts from this fund contribute directly to the provincial budget."

The committee meeting to release the annual report was scheduled for last week, then cancelled the day before. Last week, a spokesperson said the report wouldn't be finalized until July 13.

Goodwin said challenges completing accounting during the pandemic have delayed the report.

Alberta's auditor general must meet with department officials and sign off on the report before it is considered final, she said. That meeting is set for Tuesday, the auditor's office confirmed.

Government will release the report at the "earliest time possible," Goodwin said, at the committee's next meeting.

No meetings of the Heritage fund committee are currently scheduled.