AIMCO acknowledges $2.1-billion loss from volatility-related strategy
Alberta Investment Management Corp. has chalked up $2.1-billion in “realized and unrealized” losses on a volatility-related investment strategy, the pension manager’s chief executive Kevin Uebelein acknowledged Thursday.
In letter posted to AIMCO’S website, Uebelein called the result “wholly unsatisfactory.”
“This occurred because the losses that quickly accrued as market volatility dramatically increased and remained elevated were not able to be offset by the gains that would normally be realized as volatility returned to more typical levels,” he wrote.
“Markets behaved in a manner never before seen and the result was a very unfortunate loss.”
Uebelein said the strategy won’t be completely wound down before mid-june, when the actual losses will be finalized. He added that the fund manager has “taken a number of steps to limit the eventual loss.”
The pension CEO said he was writing the letter in part because recent media reports overstated the loss, with some suggesting it was $3 billion and others $4 billion.
“Anytime you are counting in the billions, it is a big number worthy of attention, and I certainly would never want to experience such an outcome from a strategy,” Uebelein said in his letter. However, he said many investors are likely to have to learn important lessons from recent and ongoing events, which included the Toronto Stock Exchange registering its largest single-day “plunge” in eight decades.
“As an independent investment manager, AIMCO takes full responsibility for the investment losses incurred by this strategy,” Uebelein wrote. “Let me be clear, the performance of this investment is wholly unsatisfactory and AIMCO’S Board and Management share the frustration and disappointment of our clients, their beneficiaries, and all Albertans.”
AIMCO had assets under management of nearly $119 billion at the end of last year, and Uebelein stressed in his letter that the pension manager has produced strong investment returns over the years by building diversified portfolios.
“Our track record of success in doing this is clear, even if the recent performance of this strategy is not acceptable,” he wrote.
The Financial Post reported last week that the pension giant was conducting a review of the volatility-linked strategy and would be providing updates to Alberta’s minister for Treasury Board and Finance.