Just days after Alberta Investment Management Corporation’s New York office celebrated its first anniversary it has been shut down entirely, along with the Singaporean office, for cost-saving reasons.
It’s a further sign of the ongoing upheaval at the C$169 billion ($119 billion) Canadian pension manager since a scathing political review last year led to a purge of its leadership team.
AIMCo started doing business from a Singapore office in September 2023 and opened its New York unit six months later. It held ribbon-cutting ceremonies for both, and the Singapore office touted high-profile hire Kevin Bong, who jumped ship from Singaporean sovereign wealth fund GIC.
The move to close both short-lived branches has led to the departure of at least Bong, chief investment strategist at AIMCo; and of David Scudellari, global head of private assets, who opened the NYC office.
An AIMCo spokesperson told Top1000funds.com that the decision was a “strategic realignment of resources”. When asked if further overseas office closures are on the cards the spokesperson did not directly respond.
“We remain committed to pursuing investment opportunities in the APAC region and globally, leveraging our extensive network of partners and our existing offices to provide continued value to our clients,” the spokesperson said.
The bulk of AIMCo’s assets are invested in North America, with 42 per cent in Canada and 33 per cent in the US. Asia represents just 3.2 per cent of the asset allocation.
The move came after AIMCo made 19 non-investment related positions redundant last month, which included its diversity and inclusion program lead.
Not out-of-whack
Despite the scrutiny it receives on costs, AIMCo’s expenses are not out of line with its peers. It is worth noting that AIMCo is a Crown corporation and investment manager for several public pension plans, and those operating under similar arrangements include giants such as the C$434 billion CDPQ, the C$229 billion British Columbia Investment Management Corporation (BCI) and the smaller C$77 billion Investment Management Corporation of Ontario (IMCO).
In the 2023 fiscal year, AIMCo’s total costs per C$100 of AUM were 66.4 cents, compared to CDPQ’s 59 cents, BIC’s 80.4 cents and IMCO’s 80.6 cents, according to their respective annual financial statements.
AIMCo’s latest annual report shows that total costs for the fiscal year ended 31 March 2024 were C$1.08 billion, compared to C$993 million in the previous year. The jump was primarily attributed to expenses related to a business transformation program – a multi-year initiative that chief financial officer Paul Langill last October told an Alberta Senate committee began in April 2023.
“We are buying an integrated investment platform, and we’re building a modern data platform,” Langill said. “The total program cost is estimated at about (C)$130 million over a four-year period.”
Other elements that lifted total operating costs included higher headcount, more assets under management and higher performance fees. The fund had at least 600 employees working in global offices at this time.
Pressure to invest locally
The closure of AIMCo’s overseas offices comes at a time when the Alberta government is attempting to mobilise more assets to invest locally. The province’s premier Danielle Smith last month unveiled a plan to grow the Alberta Heritage Fund, currently managed by AIMCo, to C$250 billion by 2050.
The fund was established in 1976 to invest a portion of the province’s resources revenue. Its primary goal will be to support technology, energy and infrastructure investment in Alberta.
The government simultaneously established a “sovereign-wealth style” agency, Heritage Fund Opportunities Corporation (HFOC) which will give directions to AIMCo on how to manage the existing C$24 billion assets of the Heritage Funds, but will itself invest the additional C$2 billion seed capital from the government in fiscal 2024.
As the HFOC’s investment model is proven, more assets could be moved from AIMCo, the government said. Canadian press reported that discussions on how to grow the Heritage Fund’s returns were held between Smith and AIMCo before the latter’s entire board was ousted in November.
At the Top1000funds.com Fiduciary Investors Symposium last year, industry luminaries who helped shape the contemporary “Canadian model” warned that it is under threat today from an increasing politicisation of the pension sector.
Mark Wiseman, who served three years as AIMCo chair before stepping down in 2023, told delegates: “When you see trillions of dollars in assets, when you see a government that is running deficits, when you see economic malaise – and we’ve seen this in other jurisdictions – this is the time when pension assets get raided. And I’ll use that term, because that is the risk that I think the Canadian model faces today.”
AIMCo’s recent woes began last November when Alberta’s Minister of Finance Nate Horner lashed out at the ballooning costs of running the fund. Horner said in a statement that AIMCo’s third-party management fees had increased by 96 per cent, the number of employees by 29 per cent, and staff wages by 71 per cent between 2019 and 2023, all while the fund managed less money.
In an unprecedented decision, Horner sacked the entire AIMCo 10-person board and then-chief executive Evan Siddall. The board has since been replenished with five members and is now chaired by former conservative Canadian prime minister Stephen Harper. Ray Gilmour has been acting chief executive since November last year, but a permanent chief executive is yet to be installed.
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