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 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 first quarter of 2021, the distribution of COVID-19 vaccines and the continued fiscal stimulus by federal governments rallied equity markets while fixed income markets contracted. The LAPP fund experienced another quarter of positive return, ending at +1.6% relative to the policy benchmark return of -0.3% in the quarter resulting in 193 basis points of value-added from active management. As for detractors to LAPP’s first-quarter benchmark return, fixed income assets, especially Universe and Long bonds, did not benefit from a steepening interest rate curve and higher inflation expectations during the quarter.
The positive alpha number for the first quarter of 2021 represents the largest gain in the Fund’s relative performance in recent memory. Significant contributors to the outperformance public and private equities and private debt.
LAPP Corporation completed their asset-liability study and updated the Plan SIPP’s 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 takes into account the rising inflation, increasing equity valuations, and still low yet rising bond yields.
As of March 31, 2021, the Fund posted a four-year annualized return (net of fees) of 6.69%, underperforming the policy benchmark of 7.02% by 0.33%.
Detailed 2021 quarterly investment results of the Plan are published below.
Visit the Funding & Investment page to see previous quarters' investment reports.