LAPP’s financial position continues to be healthy, and our progress is detailed each year in our audited financial statements, which are published as part of our Annual Report each July. Audited by the Auditor General of Alberta, the most recent accounts available are for the year ended December 31, 2020. LAPP Corporation published its financial statements for the 2020 year-end and the statements have been available for public review since July 2021.
As the administrator of the Plan, LAPP Corporation establishes an investment policy for the Plan through the Statement of Investment Policies and Procedures (SIPP). Alberta Investment Management Corporation (AIMCo) undertakes investment management of LAPP’s portfolio of assets in accordance with the SIPP. By legislation, the Government of Alberta has designated AIMCo as the exclusive provider of investment management services to LAPP Corporation.
In the second quarter of 2021, the distribution of COVID-19 vaccines, the increasing number of vaccinated individuals, and the continued fiscal stimulus by all levels of government continued to rally global equity markets while fixed income markets experienced only a modest rebound from the first quarter sell-off. Fixed Income assets, especially Universe and Long Bonds, did not fully recoup their losses from a steepening interest rate curve and higher inflation. The LAPP fund experienced another positive quarter of returns, ending at +5.35% relative to the policy benchmark return of +3.58% in the quarter resulting in 177 basis points of value-added from active management.
In the second quarter and year-to-date, all asset class portfolios delivered value added relative to their respective benchmarks, private debt and private equities were the most significant contributors to the outperformance.
LAPP Corporation completed their asset-liability study and updated the Plan's SIPP asset mix in the first quarter of this year. The updated asset mix is based predominantly on long term risk, return and correlation expectations among different asset classes. However, the mix considers the rising inflation, increasing equity valuations, and still low yet rising bond yields.
As of June 30, 2021, the Fund posted a four-year annualized return (net of fees) of +7.68%, outperforming the policy benchmark of +7.55% by 13 basis points.
Detailed 2021 quarterly investment results of the Plan are published below.
Visit the Funding & Investment page to see previous quarters' investment reports.