Oct 26, 2021

Opinion: AIMCo’s Second Mountain

The following opinion piece, was penned by AIMCo CEO Evan Siddall and appeared in the Edmonton Journal.

The New York Times columnist David Brooks wrote a book called The Second Mountain in 2019, presenting an analogy of a person's life consisting of two mountains. The first climb was one that was measured by fame, fortune, achievement and happiness — self-centred objectives. The second mountain, only seen by those who are brave enough to let parts of their old selves die after a fall from grace, is about contribution and serving others.

In July, I became CEO of Alberta Investment Management Corporation, or AIMCo, during an inflection point for the company.

In shifting attention toward how we serve others — our clients and their beneficiaries, our second mountain is coming into view. We are entrusted to invest other people's money: our province's savings, rainy-day funds and the pensions of Alberta's nurses, police officers, public servants, first responders, and teachers — to whom we owe deep gratitude for their service during these past two years especially.

Between two mountains sits a valley of despair, and we've had ours: the now well-known trading losses suffered because of a volatility trading strategy. In the wake of these losses, our board and management did the right thing. They conducted a review of AIMCo's risk management practices, and the root causes of the company's failures. Thirty-one recommendations emerged from that review and we are on track to have implemented all of them by year end.

Most importantly, our purpose in service to others will serve as our touchstone as we reorient our investing from the relentless pursuit of short-term "alpha" (or excess returns) to seeking consistent long-term returns for our clients — Albertans' pensions, endowments and public funds.

In fact, we are quite good at what we do. Over the last decade, the company has generated over $70 billion for Albertans. And we are back on track, with a total fund return of 7.3 per cent in the first half of 2021.

However, at times it looked like we were more worried about our own survival than helping our clients secure long-term prosperity for the people of Alberta. We know we need to rebuild trust and we are doing so by renewing focus on our clients.

And there is urgency to our work. Thomas Piketty's influential 2014 book, Capital in the 21st Century, argued that when economic growth is low (as it appears to be), wealth accumulates more quickly from returns to capital than on returns to labour. The crux of his argument is that investing has become more productive than working. Ever-lower interest rates and a glut of central bank liquidity exacerbates this outcome, as has a shift in the tax burden towards individual taxation and away from corporate tax.

But...what if workers own the capital? Through their pension plans, workers can share in owning the means of production. Pension plans may also help address the unsettling disequilibrium that unbridled capitalism creates. Pension and endowment investment managers therefore play a key role in closing wealth and income gaps. Delivering on our promise to our clients serves this higher purpose.

As economic forces drive us increasingly into haves and have-nots, pensions are an under-appreciated counterweight in preserving our system of democratic capitalism, still the best way of allocating capital and labour in an economy.

Helping our clients manage the retirement savings of Alberta's public-sector workers offers more than just financial security. We are helping these pensioners avoid an inequality trap and preserving a more just and prosperous future. Our mission goes beyond generating returns and answers why we do it and who for.

Redirecting our attention to a second mountain — serving others — gives us a motivating and unifying purpose. In time, my hope is that we re-earn the trust of clients and Albertans to take care of their savings and ensure a better financial future for our province.

Evan Siddall, CEO of Alberta Investment Management Corporation (AIMCo)