City investments have not avoided taken a hit in recent weeks, much like everywhere else, but city finance officials say the portfolio is meant to gain over the long term.--NEWS FILE PHOTO
cgallant@medicinehatnews.com@CollinGallant
The City of Medicine Hat’s investment funds were not spared from the bloodbath on the world financial markets last month, officials told the News when the city’s 2019 annual report was released last week.
In fact, losses were great enough to erase an astounding near 15 per cent rate of return from last year as global stock markets plunged by one-third over the course of days in mid-March.
However, senior financial administrators said Wednesday that the balance has seen some recovery since, and still remains above the $154 million that has been deposited over the course of three years.
“We’ve seen, especially during the last month, really a lot of volatility, which is not unlike anyone else who has an RRSP or mutual funds,” said Dennis Egert, the corporate services commissioner.
“You hear stories about (wipeouts) for people’s personal portfolios, but that’s not happened at the city.”
An official report on the state of the investment fund won’t be released until late May or early June, and only covers the period up to April 30, but the recent annual report gives some context.
To Dec. 31, 2019, the city recorded a 14.35 per cent rate of return for the proviso year and a total of $175 million in reserves invested with an Alberta government investment agency, AIMCo.
That agency came into focus this week as a Globe and Mail report stated it had recorded outsized losses as it continued a program to try to capitalize on stock fluctuations in April.
The alleged loss of $4 billion on the specific program would equal 30 per cent of gains from last year on the $118-billion portfolio that holds funds for major public sector pensions and the Alberta Heritage Trust Fund and other government cash.
AIMCo has been the focus of controversy this year as the provincial government began a process to move the Alberta Teachers Pension Fund under its direct management. The province is also studying how Alberta might benefit from gaining control over Alberta’s share of the Canadian Pension Plan.
A poll of city councillors done by the News early this year found few had concerns about the potential for political interference, and they favoured a long-term view of investing.
Egert said that the city has created its own strategy in conjunction with AIMCo to guide investment decisions, and that includes the call for a 60 per cent split for equities (equal parts Canadian and foreign), and 40 per cent in more stable fixed income investments.
That strategy beat the general AIMCo performance by half in 2019.
“We’re confident that, No. 1, we selected the right investment manager, and, No. 2, that we’re invested in high-quality investments, not only in bonds and fixed income, but on the equities side,” said Egert.
“Ours is more of a ‘value’ tilted preference, and over time that will perform better for the city.”
Over three years, the fund has posted an average annual return of 6 per cent – near the stated goal of inflation plus four per cent – but that has not come evenly.
Preceding the 2019 return of 14.35 per cent, the city’s fund declined 2.3 per cent during a turbulent 2018, after a first year gain of 7.1 per cent.
Of $154.2 million in total deposits, $135 million relates to funds set aside for gas well abandonment and the remainder for the city’s Heritage Savings fund, created two years ago to capture half of gas and power profits.
