Alberta Investment Management Corp. CEO Evan Siddall in Calgary, Alta., Wednesday, Sept. 21, 2022. Alberta Investment Management Corp. reported a loss of 3.4 per cent for 2022 as it faced declines in both public equities and fixed-income markets last year. THE CANADIAN PRESS/Jeff McIntoshJeff McIntosh/The Canadian Press
The Alberta government’s recent mass dismissal of Alberta Investment Management Corp.’s top leaders was the culmination of a clash over how the $169-billion pension-fund manager should be run.
Questions about leadership and spending decisions under chief executive officer Evan Siddall and some key lieutenants collided with a fraught and politicized relationship between AIMCo and the province, multiple sources said.
Stakeholders inside and outside AIMCo had concerns about its top executives and complained directly to government officials, according to two sources. They levelled a number of criticisms at Mr. Siddall and his lieutenants – who were terminated en masse last week, along with the board of directors – including meddling in investment decisions, attempts to centralize authority, unnecessary spending and high turnover among senior personnel.
Right up to the terminations, Mr. Siddall and his team had broad support from the institution’s board of directors, including the interim chairman, according to four sources familiar with the directors’ thinking.
There were occasional tensions between Mr. Siddall and board members, leading to disagreements over strategic direction and operations, those sources said. While Mr. Siddal was considered an imperfect and at times abrasive leader, he also boosted engagement scores at AIMCo over his tenure and most board members saw no reason to terminate him, the sources said.
A battle is under way for control over the future of AIMCo, Canada’s sixth-largest pension-fund investment manager, as well as its independence and its mandate to invest on behalf of pensioners, endowments and the government’s $23.4-billion Heritage Savings Trust Fund.
The Globe and Mail is not identifying more than a dozen sources because they were not authorized to discuss confidential internal matters at AIMCo or its interactions with the provincial government, and feared professional repercussions.
Mr. Siddall undertook a wide-ranging multiyear transformation to revamp AIMCo’s leadership style and strategy that included opening new international offices, a technology overhaul and shifts in risk management and investment focus. That ran up against a very different vision from the province and other stakeholders for a more Alberta-first AIMCo that would tightly control spending and be more closely aligned with the province’s priorities.
Alberta’s Minister of Finance, Nate Horner, promises to install a new board and reboot AIMCo with a “clean slate,” and supporters of the government’s decision see a much-needed reset to check excesses in AIMCo’s senior ranks. But skeptics of the housecleaning fear that it has weakened AIMCo’s ability to assert its independence, opening the door for the province to impose its agenda.
Last week, Mr. Horner dismissed Mr. Siddall and three senior AIMCo staff to whom the CEO often delegated important decisions. They were chief people, culture and engagement officer Krista Pell, chief legal officer Shelley Nixon and chief of staff Jill Urbanoski.
They were dismissed in dramatic fashion last Thursday, pulled out of a two-day offsite meeting of 200 of AIMCo’s most senior staff at the Westin Edmonton hotel. Mr. Horner informed them of their termination in a separate room, and their access cards and electronic devices were confiscated, two of the sources said.
That same day, the province issued an order revoking the appointments of AIMCo’s entire 10-member board, clearing out the pension fund’s leadership.
For the near term, the government named Mr. Horner as the sole director and board chair, then appointed long-time provincial bureaucrat Ray Gilmour as interim CEO. The government has chosen a new board chair and promised to name the individual within weeks, and to appoint a new board. Some members are expected to be invited to rejoin the board, according to four of the sources.
Mr. Siddall and a spokesperson for AIMCo both declined to comment. The former AIMCo board members either declined to comment or did not respond.
The government is widely expected to choose former prime minister Stephen Harper to be AIMCo’s next board chair. He has been at the top of Premier Danielle Smith’s shortlist for the role since last year, multiple sources said. But the government has run up against potential conflicts with Mr. Harper’s interests, which include a role at private equity company Azimuth Capital Management, that would need to be resolved.
Last year, Alberta’s then-ethics commissioner, Marguerite Trussler, was asked to review Mr. Harper as AIMCo’s potential board chair, and the opinion flagged potential conflicts of interests, according to three sources with knowledge of the advice. Earlier this year, the province replaced Ms. Trussler, appointing Shawn McLeod – a lawyer who once sought to become a United Conservative Party candidate – to the non-partisan position.
Ms. Trussler said Thursday that she cannot comment because of confidentiality restrictions.
Mr. Harper also reached out to AIMCo to schedule a meeting to pitch the pension fund on a potential investment in a fund with which he was affiliated, according to two sources, but no formal pitch was made. His outreach raises further questions about the potential conflicts that could arise if Mr. Harper is appointed.
A spokesperson for Mr. Horner, Ashley Stevenson, again cited rising costs at AIMCo that outpaced returns on investments. “For these reasons, and to restore confidence in the agency, Alberta’s government has decided to reset the investment corporation’s focus with a new CEO and board,” she said in an e-mail.
Mr. Harper could not be reached for comment.
Mr. Horner has consistently said the central reason for the government’s housecleaning in AIMCo’s senior ranks was ballooning costs, which were not matched by a similar rise in performance.
On Wednesday, former AIMCo interim chair Kenneth F. Kroner, who was dismissed last week, wrote a letter to Mr. Horner that raised concerns about the government’s statements criticizing cost and performance.
Mr. Kroner said the government’s comments “are tarnishing AIMCo’s reputation, which will only make it harder for Albertans to have confidence in a public asset manager, and will create unnecessary barriers for AIMCo in its goal to deliver strong investment performance for Albertans,” according to a copy of the letter reviewed by The Globe.
Mr. Kroner laid out a detailed account of AIMCo’s investment performance relative to benchmarks set by clients, and said the investment manager “has consistently added value,” citing as an example the fact that it has beaten the benchmark for its Heritage Fund investments in seven of the past 10 years.
He also said AIMCo’s costs “are in the lowest third of the industry,” as measured by third-party company CEM Benchmarking, and that a run-up in fees to external investment managers was a function of AIMCo’s total assets increasing.
“The data contradicts the very negative narrative that is out there,” Mr. Kroner wrote. “This misinformation will make it unnecessarily difficult for the next management team to be effective.”
The concerns that AIMCo employees and stakeholders raised with provincial officials were often more specific and speak to a management culture and style that Mr. Siddall introduced over his three years in charge.
One early issue that caused tensions internally and with clients was AIMCo’s effort to build a new, multibillion-dollar investment fund focused on the transition to a carbon-neutral economy, sources said. The idea, tentatively called Carbon Shift, was first hatched with Boston Consulting Group and former federal finance minister Bill Morneau, who is a friend of Mr. Siddall. It was one of several options AIMCo explored to create a strategy for transition investing, and AIMCo spent millions of dollars on consulting and other expenses trying to get the initiative off the ground before the plan was abandoned last year, the sources said.
Clients were alarmed by the amount of money spent and the close ties between Mr. Siddall, Mr. Morneau and BCG, two sources said. By contrast, four sources said AIMCo’s board was fully aware of the initiative and its costs, and had no significant concerns about Mr. Siddall or Mr. Morneau’s involvement.
Mr. Morneau declined to comment.
AIMCo stakeholders also raised concerns that Mr. Siddall gained what appeared to be more concentrated authority over core decision-making functions, such as AIMCo’s investment and internal audit divisions, as senior executives were pushed out of the organization, two sources said. In one instance, the audit function’s internal reporting line was changed from the chief financial officer to the CEO – as well as the board’s audit committee, which was constant, the sources said.
That change was preceded by months of internal deliberations that included friction between Mr. Siddall and audit committee chair Tom Woods, who couldn’t agree on a key aspect of the structure – whether the audit leaders should sit on AIMCo’s executive committee, sources said. In fact, Mr. Siddall wanted audit’s reporting line to remain with the CFO and the board’s audit committee, two sources said. Mr. Woods resigned from AIMCo’s board in April, before his term ended, and his departure stemmed in part from that difference of opinion, sources said.
More recently, after chief investment officer Marlene Puffer abruptly left AIMCo after two years on the job in September, Mr. Siddall split the CIO role between two investment leaders, and Mr. Siddall himself took over as chair of the pension fund’s investment committee. That gave him a veto over investment decisions for strategic reasons, two sources said.
With a report from Andrew Willis