As the administrator of the Plan, LAPP Corporation establishes an investment policy for the Plan articulated in 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 designated AIMCo as the sole provider of investment management services to LAPP Corporation.
Q3 of 2022 was a challenging quarter for capital markets enduring significant key interest rate hikes, the ongoing war in Ukraine, high inflation, and a stagnant economic outlook. Most of the Equity (Public and Private) and Fixed-Income portfolios underperformed against their benchmarks, giving back some of the outperformance gained in the previous quarter.
Real assets in the Inflation-Sensitive and Alternative portfolios experienced less volatility throughout Q2, partially due to the lag inherent in valuations of illiquid asset classes and partially performing as expected by providing much-needed inflation protection to the Plan's fund. Overall, in the last quarter, the LAPP fund returned -0.27% relative to a policy benchmark return of +0.45%, a detraction of 72 basis points of value-add from active management.
The Fund returned -8.9% year-to-date, outperforming the policy benchmark by 54 basis points. Most of the year-to-date value-add came from active management of Public Equities, Fixed Income, Inflation-Sensitive, and Alternative assets. Public Equities and Fixed Income earned a positive value-add of 125 bps and 57 bps, respectively, versus their benchmarks. Inflation Sensitive and Alternative assets generated 234 bps of value-add relative to their benchmark. Private Equity was the only asset class that underperformed year-to-date.
As of September 30, 2022, the Fund posted a four-year annualized return (net of fees) of +4.98%, outperforming the policy benchmark of +4.06% by 92 basis points. Private assets held by the Plan earned the highest value add, while Public Equities generated the lowest alpha relative to the other major asset classes over this four-year horizon.
Detailed 2022 quarterly investment results of the Plan are published below:
Visit the Funding and Investment page to see previous quarterly investment reports.