Alberta’s Innovative Investor: AIMCo

Ashby Monk

I admit it. I actually…gasp…enjoy reading institutional investors’ annual reports. They provide an opportunity for the funds to explain to their stakeholders and the world what they are doing and why they are doing it. So while I’ve probably read hundreds of these things, I still manage to take away new insights and ways of looking at the business of institutional investment after reading a good one. And, lucky for me, the Alberta Investment Management Corporation (AIMCo) published its 2010/11 annual report yesterday. And it’s a good one.

Now, AIMCo is one of those funds that I tend to track quite closely. Why? Couple of reasons. First, it’s got quite an innovative and sophisticated management team that is dedicated to building a world-class institutional investor in Edmonton (see some deep thoughts here). Second, the fund has a unique organizational structure, as it manages money on behalf of 26 pension, endowment and government funds located in Alberta. Third, it has $70 billion in AUM, which means it’s big. And, finally, as an Edmonton native, I still have plenty of family there that rely on the fund’s success. (That’s right. I’m keeping my eye on you, AIMCo. Don’t mess with my uncle’s pension!)

Anyway, the AIMCo report doesn’t disappoint. Not only did the fund do quite well in terms of returns, it also seems the organization is moving in a very positive direction. Here are some of the interesting nuggets I gleaned from this year’s annual:

“We are building AIMCo on the premise that a conscientiously governed and disciplined organization that can attract and retain highly talented investment expertise will, over time, produce superior investment results.”

Agreed.

“AIMCo’s predecessor company, lacking the necessary internal systems and operating infrastructure, relied extensively on external managers. That is an expensive option as evidenced by historical budgets in which the 20% of the assets managed externally accounted for approximately 80% of the expenses. Since AIMCo’s launch, management has concentrated on enhancing our risk management and operational controls, and on strengthening the internal talent pool both through development and recruitment. As a result, we have been able to meaningfully increase the percentage of assets managed internally and use the savings to finance operational improvements.”

Cool.

“Peer comparisons are of limited value. The different circumstances and preferences of organizations are reflected in their policy asset mix and risk limits.”

Totally agree. How do you find comps for a fund with 26 clients (and 26 risk profiles)?

“What do you see as your biggest challenge in the years ahead? Convincing everyone to retain a long-term focus and not be myopic about quarterly or even annual results. Over most of human history, you had to be good at surviving today, or there was no tomorrow. Most people have trouble evaluating long-term costs, risks and opportunities in pension programs, because we have had less than a century of practice. Our instinctive response to poor results today is to be wary of pots of gold at the end of long run rainbows. That very reaction could be what is keeping long-term return on risk higher than it should be.”

Beautiful!

“Our starting position was less than ideal. In an attempt to emulate peers, our predecessor organization increased investment complexity in unlisted assets between 2004 and 2008, without proper operations and IT support. It was like an old volkswagen trying to purr like a porsche. In Operations, processes and controls are now far more robust, but it still feels like a construction zone. Most IT projects take 18 months to put in place. To deal with 10 years of under-investment, we are halfway done implementing a dozen, without any hiccups. That is a huge accomplishment in itself.”

Good. It’s time somebody invested in the organization! Anyway, there is a lot more in there worth reading. But, for now, I’ll just leave you with a shot of my homeland:

1 Response to “Alberta’s Innovative Investor: AIMCo”


  1. 1 Andrew Rozanov July 7, 2011 at 3:57 pm

    Ashby, your homeland is truly beautiful!


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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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