AIMCo seeks looser leverage restrictions

Tue Jul 5, 2011 8:23pm EDT
 
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Alberta's public wealth manager is in talks with regulators to lift the amount of leverage it is allowed on its books, its chief said on Tuesday after it reported 8.2 percent return on investment in its latest fiscal year.

Alberta Investment Management Corp is bound by strict provincial limits on how much pension plans can borrow to invest in assets, and that keeps results at a level that lag some peers outside Alberta, AIMCo Chief Executive Officer Leo de Bever said.

He contended that allowing more leverage would actually reduce investment risk by better balancing assets and liabilities. Pension leverage rules are established by Canada's provinces individually.

"I don't want to go in there with cannons blazing, but it's certainly a discussion we have," de Bever told reporters. "We're basically asking the regulator to decide: 'If you want efficient financing of pension plans, are you willing to give me a bit more freedom than I have now?'"

Established by the Alberta government, AIMCo manages nearly C$70 billion ($73 billion) in public sector pensions as well as such government accounts as the Heritage Savings Trust Fund, a rainy-day fund made up of money from the oil-rich province's energy take, as well as the Sustainability Fund, which is used to fund budget deficits.

It invests in a range of securities and infrastructure, and is part of the Maple Group consortium seeking to gain control of TMX Group Inc, operator of the Toronto Stock Exchange, with a C$3.8 billion bid.

In 2010/2011, AIMCo generated a 10.3 percent return on pensions and endowment assets and 8.2 percent on total assets, including short-term government funds, reflecting above-average market returns. Its clients' policy to eschew currency hedging cost a few percentage points last year, it said.

In comparison, the Ontario Teachers Pension Plan Board, one of the country's largest pension funds, generated a 14.3 percent return in its most recent results.   Continued...