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Recent media reports regarding losses at AIMCo

We’ve had many members ask us about recent media reports of an investment strategy used by the Alberta Investment Management Corporation (AIMCo) that resulted in significant losses (see articles in the Globe and Mail and Institutional Investor). Our members are expressing concern about their assets and their pensions, so we want to reassure them that their pensions remain secure.

First let us say that while the Government of Alberta passed legislation late last year requiring ATRF to transfer our asset management to AIMCo, at this time all ATRF investments remain under our management.

“We are in the process of transferring our asset management to AIMCo as the Government of Alberta has required us to do, but that transfer has not completed so ATRF assets have not suffered as a result of the AIMCo losses reported in the media,” said ATRF Board Chair Sandra Johnston. “I want to reassure ATRF members that we continue to work diligently on their behalf doing everything we can to ensure this transfer will not harm the long-term stability of our plans and the security of their pensions.”

Transferring management of these assets is a very complex process that will require some time to complete. Our singular focus with this transition remains on ensuring the arrangement we put in place with AIMCo is in the best interest of our plans, and will protect teachers’ assets as much as possible.

We recently posted an update on some of the strategies we’re using to manage through remarkable market turmoil. In light of recent developments, we want to give a bit more detail about the way we approach asset management at ATRF as a Pension Manager, and especially the way that approach differs from that of Asset Managers.

Delivering value-added investment returns is central to any investment management strategy, but for Pension Managers a focus on managing risk at the overall pension plan level is equally, if not more, important. We are responsible for ensuring our pension plans are well-funded, while also keeping contribution rates affordable, and the only way we can do that is by being as prepared as possible for a market downturn. We know investment markets don’t go up forever, and significant corrections will happen periodically. We also know predicting when these corrections will happen is nearly impossible.

So as a fully-integrated Pension Manager, in setting our long- and short-term strategies we think not only about adding value above benchmarks, but also of protecting the funding of the plan in the long term and during market corrections. What sets Pension Managers like ATRF apart from Asset Managers in times of market stress is this focus on protecting value, and the way our plans’ funded status remains our highest priority.

As a result, while we can’t avoid losses when the market falls as it did in March, we structure the portfolio to avoid making a bad situation worse when it does happen.

ATRF CEO Rod Matheson added, “Market volatility of the kind we’ve seen recently will result in losses for nearly all asset and pension managers. We are concerned about the additional losses that AIMCo clients are incurring as a result of a specific strategy. We have focused on setting up the relationship with AIMCo in a way that protects the interests of our plans and plan members, and this is a good reminder for us of the importance of that work.”

Ms. Johnston went on to explain, “We are set up as a Pension Manager to ensure we manage risk appropriately for a pension plan. Any transfer of assets must include protections for our members against exactly this kind of extreme risk, and that is what we are working towards.”

Our highest priorities at ATRF have for decades been ensuring teachers’ pensions are secure and their pension plan assets are stable - and we’ve built our investment portfolio to reflect that. Alberta teachers should rest assured that we will continue working hard on their behalf to make sure their retirement income is protected.

© Copyright 2015, Alberta Teachers' Retirement Fund Board
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