Alberta Heritage Savings Trust Fund posts negative returns of 4.1%

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After the Alberta Heritage Savings Trust Fund reported a 4.1% yield loss in the first quarter, officials say it was largely down to stock market jabs.

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The report released Aug. 31 for the period ending June 30 saw the fund’s market value decline by around $900 million, to $19.1 billion, from a high of $20 billion at the end of the year. Last year. After deducting some $1.2 billion for the province’s general revenue fund, its assets were estimated at about $17.9 billion.

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At a legislative committee meeting on Monday, Lowell Epp, assistant deputy minister for Treasury Board and finance, said the first quarter results were not unexpected.

« I’d love to bring you good news, but the first quarter was anything but, » Epp said, adding that the fund’s mandate is to maximize long-term returns, so it needs to take risk.

Over the past five years, it has averaged a return of 6.5%, which is just above its target of 6.4%.

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The challenges facing the Legacy Fund, the province’s long-term piggy bank, are not unique and the report notes that they have affected asset managers globally.

“Rising interest rates and global growth concerns are two important factors influencing the value of investments, which is evident in performance results,” he noted.

The fall in value was mainly due to holdings of public equities – stocks traded on exchanges – which represented 37.6% of the fund’s total investments, but fixed income investments which generally include less risky bonds also suffered a decline. by 4.6%.

Alberta Investment Management Corporation (AIMCo) CEO Evan Siddall told committee MPs that it was impossible to say whether the fund will recoup its losses this year, as quarterly reports reflect a snapshot of the market and make asset value estimates.

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“They fluctuate a lot and in the long run an investor can tolerate those fluctuations, and we certainly hope to recoup those losses, but… I wouldn’t predict or promise that. I don’t have that crystal ball,” he said.

Sandra Lau, chief investment officer at AIMCo, said that generally stock markets have seen declines of 10-16%, depending on the region.

“We have seen a massive sell-off in the stock market over the past quarter, which is the worst quarterly (sell-off) we have seen since the COVID crisis,” Lau said.

The fund benefited from gains in what it calls “inflation-sensitive investments,” including infrastructure and real estate. These gained 4.6% and represented 33.6% of the total portfolio during the quarter.

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In its latest financial update, the UCP government pledged to add $3 billion of its projected surplus of $13.2 billion to the Heritage Fund.

At the committee, Siddall also spoke about AIMCo’s goals of expanding investments internationally, including in Asian markets, and towards « financing the transition » investments in a low-carbon economy.

“While we believe there will be a future for hydrocarbons globally, the net zero commitments of some will require additional decarbonization discipline. We believe there is money to be made for investors long-term in this area and we are exploring the opportunities there,” he said, adding that the investment manager plans to present a new investment strategy to its board in a few weeks.

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