Premier Danielle Smith plans to shake up Alberta’s the Heritage Fund

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The Alberta government is seeding a new investment vehicle with $2 billion as part of a plan to boost the province’s resource investment fund tenfold to at least $250 billion by 2050.

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The money to be invested and managed by the new Heritage Fund Opportunities Corporation was previously earmarked for the Alberta Heritage Savings Trust Fund, which was started in 1976 to invest a share of the province’s resource revenue for the future and diversify the economy.

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For now, the rest of the nearly $24 billion in the Heritage Fund will continue to be managed by Alberta Investment Management Corp. (AIMCo), a Crown corporation that also manages the pensions of public servants across the province, under the direction of the new corporation. 

“As the investment model is proven, more funds could potentially be moved from AIMCo,” a government spokesperson said.

At a news conference Wednesday, premier Danielle Smith said the new investment vehicle is necessary, in part, to ensure returns generated by the Heritage Fund are reinvested over a long horizon, allowing the fund to grow larger and faster than it has in the past when this wasn’t always the case. 

Her plan, laid out alongside finance minister Nate Horner, is that the fund will have a strong focus on maximizing growth “while supporting areas that matter to Albertans, such as technology, energy, and infrastructure.”

Horner added that some of the investments will be “beyond AIMCo’s mandate,” adding that they will be “more in a sovereign-wealth style,” which could lead to joint investments with other long-term sovereign wealth funds.

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However, Smith stressed that the fund will operate at arm’s-length from government.

“It is critical that the Heritage Fund Opportunities Corporation be free to make the right decisions for long-term growth without interference from government, which is why we’ve set it up as an arm’s-length agency,” she said. “A broad group of directors will bring deep financial experience so that it can focus on improving long-term Heritage Fund investment growth outcomes.”

Smith said the new Heritage Fund Opportunities Corporation will be chaired by Joe Loughheed, a Calgary lawyer and son of the former premier who created the Heritage Fund. The goal, she said, is to ultimately create a wealth fund that can forge global partnerships, and will supplement and potentially ultimately replace unpredictable resource revenue.

A document laying out the plans further suggests that a retail investment product could be developed “to allow Albertans to invest directly in the Heritage Fund, subject to public interest and feasibility.”

Sources say Smith’s idea to boost the returns of the Heritage Fund, which she has been speaking about publicly for months, were discussed with AIMCo before her government took the unusual step in November of ousting the entire board and the investment manager’s chief executive, Evan Siddall.

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Reasons cited by the government included that rising costs of AIMCo were not commensurate with returns, though this was disputed in a letter sent to Horner by ousted chair Kenneth Kroner.

According to sources familiar with the proposals, AIMCo’s gameplan included taking in more money and increasing returns through additional investments in private assets such as infrastructure. 

Following the November purge, Horner installed former prime minister Stephen Harper as AIMCo’s chair and senior civil servant Ray Gilmour was named interim CEO.

A new unpaid position was established on the board for the deputy minister of treasury board and finance as a way “to ensure more consistent communications between AIMCo and Alberta’s government.”

In addition to discussing a Heritage Fund overhaul with AIMCo before the shakeup, Smith’s government was also working with outside consultants, according to news reports.

In May, the Calgary Herald reported that the government had retained a firm called BERG Capital Management, an investment consultant for pensions and sovereign wealth funds that changed its name to PNYX Group, to do a “deep dive” on the Heritage Fund.

Then, in November, after the UCP government passed an order-in-council approving the incorporation of a provincial corporation for the purpose of managing and investing all or a portion of Crown assets, Smith told the Herald that “a hybrid investment strategy” was possible, with pension funds invested in a very conservative way while Heritage funds would be invested in a manner that would allow them to grow ten-fold by 2050.

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