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AIMCo must continue to focus on maximizing investment returns
Deputy premier Dave Hancock has appropriately expressed his support for Alberta’s technology sector, but he would be well advised to stop suggesting that the investments of public workers and the government’s own endowments should help nurture it.
There’s no doubt that startups struggle to access financing, and examples abound of tech companies that generated whopping profits for their earliest supporters. Shares in Apple Inc. went on sale in 1980, for instance, at $22 each and have split three times. This week, they are trading for more than $525 a share.
Hancock was talking about the Alberta Investment Management Corp., or AIMCo, which is at arm’s length from the government. Its job is to get the best returns on the pension contributions of civil servants and funds that the province itself has squirrelled away, such as the Heritage Fund.
“We’ve got a significant investment portfolio with AIMCo, and right now its mandate is to invest to get a high return in fairly stable investments,” Hancock said after his speech at an Innovate Calgary event on Monday. “Many good investment portfolios will invest three to five per cent in the high-risk, in the innovation side. We need to discuss how we can do that.”
It would be a mistake for Hancock or others in cabinet to signal — even indirectly — to AIMCo’s money managers that getting the best return on its investments isn’t job No. 1. For one thing, that’s the central aim of investing money, and for another, by what nebulous criteria would well-intentioned investments be made into unproven and evolving companies and their technologies? Hancock talks of putting up to five per cent into such investment categories, but with $70 billion under AIMCo’s management, the figures aren’t inconsequential.
A safer alternative is considering the creation of a small business venture capital program, such as the one in British Columbia. Investors who provide funding to qualified early-stage technology companies can receive a 30 per cent tax credit. Under this system, investors put up their own money, understanding that they’re taking a greater risk than associated with more stable investments. The reality, of course, is that in order to backstop more generous tax credits, somebody has to pay more than they otherwise would — either as individuals or corporations that might also be struggling to keep their heads above water.
If the Redford government truly wants to help businesses — big ones as well as those just finding their feet — then it should continue to offer a competitive tax and regulatory environment. Just this week, we drew attention to the Canadian Federation of Independent Business’s report card, which awarded Alberta a D for its efforts at eliminating red tape. Such an appraisal suggests the government can do more to eliminate barriers to companies’ success without tinkering with AIMCo’s common-sense investment mandate.
In such matters, the government should remember the wisdom former premier Ralph Klein expressed in 1998: “The government should be getting out of the business of being in business.” Wise words indeed. Hancock should leave AIMCo to make its own investment decisions, knowing they’ll include technology companies where appropriate.