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, 2019. Financial statements for the December 31, 2020 year-end will be published and available for public review in July 2021.
As the administrator of the Plan, LAPP Corporation establishes 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 fourth quarter of 2020, after the presidential election in the U.S., the approval of COVID-19 vaccines and the unprecedented fiscal stimulus introduced a few months earlier, equity markets continued to rally. The LAPP fund experienced another quarter of positive return, ending the period at +4.1% relative to the policy benchmark return of 4.3% in the quarter.
For the whole of 2020, the LAPP fund generated a return of +4.53%, relative to the Plan’s policy benchmark return of +9.46%. The negative alpha of 493 basis points for the last fiscal year represents the largest drop in the fund's relative performance in the previous ten years. The underperformance was attributable to losses in the quantitative public equity strategies in the first quarter, as well as to reduced valuations of real assets (particularly, real estate).
On a positive note, the LAPP Corporation-directed downside protection strategy (DPS), which was active between February and December 2020, provided market downside protection to the fund during the equity market crash in the first quarter and ultimately contributed $185 million (net) to the Plan beyond amounts recouped after the equity markets rebounded.
As of December 31, 2020, the Fund posted a four-year, annualized return (net of fees) of 7.06% underperforming the policy benchmark for the same period of 7.88% by 0.82%. As measured by quarter ends, AIMCo has been short of LAPP’s SIPP-specified value-added expectations for 50 consecutive quarters, or 12.5 years.
Detailed 2020 quarterly investment results of the Plan are published below.
Visit the Funding & Investment page to see previous quarters' investment reports.