ATRF’s Role in Investment Management
It’s been about three and a half years since the Government of Alberta announced ATRF would be required to change the way the plans’ investments are managed. The transition was completed in 2021, but we continue to get questions from members who aren’t sure what the changes mean for them and their pensions, so we wanted to give an update on where things are at and clarify how ATRF’s investment management is being done.
In late 2019, the Government of Alberta introduced legislation that required ATRF to transfer its asset management function to the Alberta Investment Management Corporation (AIMCo). The legislation did not affect any other part of ATRF’s operations, including the way ATRF administers teachers’ pension plans, the pension benefits paid to members, nor changes to any other part of our work at ATRF. The changes are strictly in relation to the way ATRF investments are managed.
AIMCo’s Role in Investments
There was a great deal of negotiation between ATRF and AIMCo to establish the terms of our working relationship. Ultimately, ATRF was able to achieve an Investment Management Agreement (IMA) that addressed our most significant concern: that ATRF will continue to develop the comprehensive investment policy and strategy, while the implementation and day-to-day management of ATRF’s assets is conducted by AIMCo.
This was ATRF’s key concern throughout the negotiations because it is the investment strategy that is primarily responsible for the long-term investment success of the plans.
Investing at ATRF is a particularly specialized function because, as a pension manager, ATRF takes a long-term, risk-aware approach to investing that is specifically suited to meet the needs of our plans and the plans’ beneficiaries. Through our funding policy and the investment direction we provide to AIMCo, ATRF manages the risk factors inherent in our investment portfolio, which is central to achieving the long-term results needed to fund pensions.
Once the asset management transition was complete, we provided our investment strategy to AIMCo and now look to them for effective day-to-day management. This is the other key investment function that ATRF has retained, oversight.
This function is also vital to our investment success because only ATRF can properly evaluate the work done by AIMCo to determine how well they implement our strategy, and then assess the results they achieve. This has required a great deal of work to properly establish because we have high standards for the reporting we require and the level of transparency we expect. We are happy to report we have made significant progress in this area, and we look forward to developing new ways to report on our investment results to members based on these new structures.
Beyond the investment-related activities, ATRF continues to be a pension manager for the plans and is ultimately responsible for managing plan funding. The ATRF Board continues to set contribution rates and provide strategic oversight of the plans. ATRF still has its robust pension services operation that serves members. We ensure members receive their pensions in a timely fashion and help members deal with life events that impact their pensions. In short, ATRF has done, and still does, a lot more than manage an investment portfolio. That will not change.
Many of our members have expressed concerns about the transition and what it will mean for their pensions, so we want to reassure members that this transition did not affect their pension benefits, and ATRF remains on the job, looking out for the best interests of our pension plans.
Recent Investment Returns
We also know many members are interested in investment results so far this fiscal year.
After a difficult year in the markets for ATRF’s fiscal year ended August 31, 2022, we are pleased to see positive returns for the first six months of the current fiscal year (to February 28, 2023). ATRF has achieved a return of 3.8% for the first six months against a benchmark (or target) that has also returned 3.8%. An improved equity market has been a driver of this positive performance, as have some of our more illiquid asset classes such as infrastructure and private equity. ATRF continues to focus on the long-term, and we are pleased to report that the four- year and 10-year return numbers are 7.1% and 8.5%–both above our benchmark.