The City of Medicine Hat was completely unconnected from provincial investment agency AIMCo., as of 2023, choosing to spread its portfolio among a number of "top-tier asset managers."--NEWS FILE PHOTO
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The City of Medicine Hat has no position in AIMCo – the province’s investment wing that is in the midst of restructuring – after moving treasury management in house at city hall last year and contracting it to a number of private-sector investment houses.
Medicine Hat’s funds were returned and reinvested with alternate fund managers with a new allocation formula over the past two years, a move administrators say lowers relative risk and has increased returns.
Coun. Darren Hirsch, chair of the audit committee which receives treasury reports, has remarked over the last two years about the positives of “maturing” investment policy at the city.
It is set to earn a near 10 per cent rate of return on nearly $800 million for 2024
in more than a dozen wealth managers across North America.
“It’s nice to participate in a market run like this,” said corporate services managing director Dennis Egert.
That comes seven years after the city earned the ability to invest reserve funds into equities and other areas beyond extremely conservative bonds under provincial restrictions on municipal finances.
Originally, a move to the major cities investment regulation saw $150 million deposited with the provincial investment wing.
“At that time we decided to select AIMCo.,” said Egert. “It’s a Crown corporation and we felt comfort with that. They were a great partner venturing into a new area for the city.
“As we increased our investment, we felt more comfortable, in 2022 and 2023 we felt we could expand with top-tier asset managers. It was a strategic asset reallocation.”
The Alberta Investment Management Corporation is an agency of the province that manages and invests more than $160 billion on behalf of the government, including the Alberta Heritage Trust Fund and major public pension assets.
Its entire board was sacked last week in a surprise move with “under performance” and increased management costs cited as the reason.
Finance Minister Nate Horner takes over governance and former Medicine Hat corporate services commissioner Ray Gilmour, a longtime top bureaucrat with the province, takes over operations.
The province has said the agency’s returns were below expectations.
The agency was widely criticized in the public for famously losing more than $2 billion in 2020 through hedges that benefited from market stability.
In 2021, city treasury officials engaged consultants to reduce Medicine Hat’s investment risk profile.
City officials are not commenting on the current changes, but confirm the municipality has no exposure to AIMCo. Funds were transferred out of the provincially managed firm to other firms as they came due over the past few years.
The city’s account with AIMCo. was originally chosen to hold medium- to long-term horizon funds, including money earmarked for gas well abandonment, as well as new deposits related to the municipal Heritage Savings Reserve.
Egert said the relationship was beneficial, but unique, which presented some challenges.
Medicine Hat was the only AIMCo. client that wasn’t legislatively required to work with the corporation, and was a relatively small client with a few hundred million dollars invested, compared to billions in the Alberta Teachers Pension Plan, the Local Authorities Pension Plan and the Special Forces Pension Plan.
The latter two plans cover municipal, irrigation district and library workers, as well as police and firefighters.
