Alberta Investment Management Corporation

Equities

Equity holdings, which contain both public and private equity, total to 43% (2015) of AUM. The public equity portfolio maintains exposure to a diversifying set of common style factors, as well as stock selection and other idiosyncratic risk. By investing with both private funds and co-venture deals, AIMCo private equity focuses on business that generate stable free cash flow and are operated by strong management teams.

Illiquid Investments

Illiquid Investments, which constitute 22% of AUM, include long-term holdings in Real Estate, Infrastructure and Timberland. The long term Real Estate assets are the core strategy direct investments in office, retail, industrial and multi-unit residential properties located in major Canadian Centres. AIMCo's Infrastructure investments match long duration real return asset characteristics with inflation indexed-pension liabilities. The Infrastructure and Timberland assets are held to provide inflation hedging and a long-term duration match with client obligations.

Fixed Income

The Fixed Income portfolios are managed with the objective of capital preservation, liquidity, and risk-controlled return relative to benchmark. These asset classes make up 35% of AIMCo's AUM.

Asset Mix (as of 2015)

Responsible Investing

AIMCo's approach to Responsible Investment is governed by its fiduciary duty to clients and a long-term investment horizon. AIMCo seeks to maximize risk-adjusted returns by integrating environmental, social and governance (ESG)) factors into investment analysis across all asset classes. AIMCo's Responsible Investment processes include:

• Exercising proxy voting rights on behalf of AIMCo's clients at annual general meetings of publicly traded companies globally to enhance shareholder value. Votes are guided through AIMCo’s Proxy Voting Guidelines, and take into account unique circumstances and markets.
• Engaging with companies to effect positive change when possible and collaborate with like-minded investors to influence corporate behavior, rather than divesting of applicable holdings; an approach called “voice over exit”. Engagements are identified through ESG focus areas approved by AIMCo's Responsible Investment Committee.
• Being a signatory to the United Nations Principles for Responsible Investment (PRI), the Responsible Investment Association, the Canadian Coalition of Good Governance (CCGG) and several others.
• Disclosing its Responsible Investment policies, guiding documents, activities and proxy voting record on its website.

Howard Energy Partners

• In 2016, AIMCo's Infrastructure Private Equity group became the second largest shareholder of Howard Energy Partners, acquiring a 28% stake from EnLink Midstream Partners, LP. This transaction followed AIMCo's initial investment in August 2016 which allowed for the purchase of up to $500 million of Series B preferred units. Evercore Partners, a New York based investment bank served as financial advisor to AIMCo.

MF Global

• AIMCo, in combination with the Virginia Retirement System successfully recovered $204.5 million after co-leading the class action securities litigation against MF Global, a now defunct broker dealer. AIMCo was advised by Goldman Sachs under a consortium of underwriter defendants.

Hayward Industries, Inc.

• AIMCo, in partnership with MSD Capital and CCMP Capital acquired Hayward Industries in 2017. Although the consortium of investors acquired a majority stake in Hayward, management will retain a minority stake for investor alignment purposes. Bank of America and Houlihan Lokey served as financial advisors on this transaction while Morgan Stanley, Jefferies LLC, and Nomura Group provided financing for the deal.

Groupo SAESA

• In 2011, AIMCo, under a landmark transaction, acquired Morgan Stanley Infrastructure Partners 50% interest in the Chilean company from Inversiones Grupo Saesa Limitada (Grupo SAESA).^[7] This electricity transmission and distribution company is jointly owned by AIMCo and Ontario Teachers’ Pension Plan (OTPP).

D.E. Shaw & Co.

• in 2016, AIMCo entered into a strategic financing agreement with D.E. Shaw & Co., a $40 billion New York-based hedge fund where it will provide $500 million in capital to pursue renewable energy investments globally.

FTP Power LLC

• AIMCo, in partnership with U.S. based AES Corp. acquired a 100% stake in FTP Power LLC from FirTree Partners for $1.6 billion in cash and debt. This investment gives AIMCo ownership of 150 utility and distributed electrical generation systems across the United States and the United Kingdom, increasing their exposure to green energy globally. Barclays Investment Bank and Citigroup served as co-financial advisors on this transaction.

Autopista Central

• Acquired in 2011, this Chilean toll road was sold for $1.5 CAD billion in 2015 to Abertis Infraestructuras SA (Abertis).^[8] This investment was an AIMCo-only led private investment. Through significant operational excellence, and eventual monetization, the private equity investment captured significant value add as it saw a positive ROI.

Porterbrook

• AIMCo alongside long-term infrastructure investors Allianz Capital Partners (ACP) and Hastings Fund Management (Hastings) purchased Porterbrook Rail Finance Limited (Porterbook) for an undisclosed amount.^[9] This major rolling stock leasing UK company owns and manages a fleet of approximately 5,900 railway vehicles. AIMCo is still a major stakeholder in this company.

London City Airport

• An AIMCo led consortium of Ontario Municipal Employees Retirement System (OMERS), Ontario Teachers’ Pension Plan (OTPP), and Wren House Infrastructure Management Limited (Wren House) acquired the London City Airport in 2016.^[10] This group, called the Consortium, committed to developing the existing and new airline relationship and routes, improving the airport's customer service and generating opportunities for new and existing employees.

BBC Television Centre

• In 2012, Stanhope, Mitsui Fudosan UK and AIMCo, on behalf of its clients, completed the purchased BBC Television Centre in West London. Construction began in summer of 2015 to develop homes, offices, hotels, retail and leisure facilities within this 13.7-acre area.^[11]

Employees

When AIMCo was created on January 1, 2008, it had a staff of 137. By December 31, 2016 the number of employees has grown to 425, across the organization's Investment Management and Risk teams, Investment Operations, and Corporate Services.

Operating costs

AIMCo operates on a cost-recovery basis. Total expenses for the year ended March 31, 2014 were $445 million, equating to 46 cents per $100 of invested assets.^[12] AIMCo is increasing internal investments in people and technology to achieve greater cost-efficiencies over the next three years. It expects to internalize the management of an additional $8 billion of assets ($5 billion in equities and $3 billion in inflation sensitive). The net result is a projected savings of $45 million in operating costs every year, starting in 2012. These cost savings may then be passed along to the Clients on whose behalf funds are managed.

Governance

AIMCo was established as a crown corporation by the Province of Alberta to provide independent, arms length investment management services to designated pension funds and provincial public sector bodies and funds, with strong accountability for its investment decisions.

According to AIMCo's website,^[13]

The Board of Directors is responsible for overseeing management of the business and affairs of AIMCo. As part of this mandate, the Board sets the strategic direction of the Corporation and oversees the development and implementation of policies and procedures that govern the conduct of AIMCo's business.

— AIMCo website

According to the Alberta Investment Management Corporation Regulation^[14]

Individuals appointed to the board must have proven and demonstrable experience and expertise in investment management, finance, accounting or law or experience as an executive or a director in a senior publicly traded issuer.

— Alberta Investment Management Corporation Regulation, Section 5.

According to AIMCo's 2010/2011 Annual report,^[15]:39

Directors are required by statute to act honestly and in good faith with a view to the best interests of the Corporation and are required to exercise the care, diligence and skill that a reasonable and prudent person would exercise in comparable circumstances. The Board of Directors meets six times every year with meetings scheduled one year in advance. Additional meetings are arranged as required.

— AIMCo Annual Report

Board of Directors

• Richard Bird (Chair)
• Phyllis Clark
• Ross Grieve
• Helen Kearns
• Ken Kroner
• Jim Prieur
• Sarah Raiss
• Harold Roozen
• Sharon Sallows
• Robert Vivian Jr.
• Tom Woods

^[16]

Alberta Heritage Savings Trust Fund

The Alberta Heritage Savings Trust Fund was created in 1976 by the Alberta Heritage Savings Trust Fund Act^[17] with three objectives: "to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans.^[18]

Initially, the fund received 30 per cent of Alberta's non-renewable resource royalties. During the early 1980s, the fund made loans to other provincial governments in Canada. Later the fund's money was used for capital infrastructure projects.^[18]

To date, over $33 billion has been made available to fund Albertans’ priorities, such as health care, education, infrastructure and social programs. The Fund is managed with the goal of maximizing long-term real returns at a prudent level of risk. Under the Alberta Heritage Savings Trust Fund Act, all income, less the amount required for inflation proofing, is used as revenue by the government. The Heritage Fund is a member of the International Forum of Sovereign Wealth Funds and is therefore signed up to the Santiago Principles on best practice in managing sovereign wealth funds.^[19] AIMCo works closely with Alberta Treasury Board and Finance to set long-term objectives for the Heritage Fund and implements these objectives through investments in a globally diversified mix of bonds, public and private equities, hedge funds, real estate and other real asset investments, such as infrastructure and timberland.

Pension Plans

AIMCo manages the investment assets on behalf of the following pension plans on behalf of its sole shareholder, the Alberta Minister of Finance:

• Local Authorities Pension Plan (LAPP)^[20] – The Local Authorities Pension Plan (LAPP) is a contributory defined benefit pension plan that currently enjoys strong net positive cash flows. As the largest pension plan in Alberta, LAPP remains focused on keeping the Plan sustainable to pay future benefits for its members. LAPP holds a globally diversified portfolio of asset classes, such as equities and bonds, in addition to investments in inflation sensitive assets. To help LAPP achieve its goals, AIMCo employs a multi-strategy approach that makes use of commingled or pooled funds. This provides cost savings, efficient execution and diversification through access to a variety of products, such as fixed income, equity, inflation sensitive and non-traditional asset classes, including private equity and timberland.^[21]
• Public Service Pension Plan (PSPP)^[22] – established in 1947, this plan is for employees of the Alberta government and other public service organizations.^[23]
• Special Forces Pension Plan (SFPP)^[24] – established in 1979 for police officers, police chiefs, and deputy chiefs employed by local authorities in Alberta.^[25]
• Management Employees Pension Plan (MEPP)^[26] – the foundations of this plan were established in 1972. Then known as the Public Service Management Pension Plan for management employees of the Alberta government and other public sector organizations. In 1994 the Plan changed and was renamed MEPP.^[27]
• Provincial Judges and Masters in Chambers Pension Plan (Registered) and Supplementary Retirement Plan for Provincial Judges and Masters in Chambers (Unregistered);^[28] collectively known as the “Judges Pension Plan” – the registered part of the Plan provides benefits up to the maximum allowed for registered pension plans under federal tax rules. The unregistered part of the Plan provides benefits in excess of those limits. Established in 2001 with provisions retroactive to April 1, 1998, the Judges Pension Plan replaced the Provincial Judges and Masters in Chambers Pension Plan established September 1, 1988. Prior to that, judges and masters in chambers contributed to the Public Service Management Pension Plan.^[29]
• Supplementary Retirement Plan for Public Service Managers^[30] – established on July 1, 1999, this plan provides additional pension benefits to public service managers of designated employers who participate in the Management Employees Pension Plan (MEPP) and whose annual salary exceeds the yearly maximum pensionable earnings limit under Canada's Income Tax Act.^[31]

Government Funds

The Government funds managed by AIMCo are used for Albertan services such as health care, education, infrastructure and social programs. As a result, AIMCo invests in private equity, public equity, fixed income and private debt.