The LAPP fund is actively managed by Alberta Investment Management Corporation (AIMCo) – the Plan’s investment manager. LAPP Corporation evaluates fund performance and measures the value added by AIMCo through its implementation of active investment management strategies.
To evaluate AIMCo, LAPP Corporation compares actual investment results to LAPP’s investment policy benchmark. The benchmark return represents what the Plan could reasonably expect to earn without active management if it invested in market indices in proportion to the policy asset mix approved by the Corporate Board. Note that not all asset classes included in the asset mix of the LAPP Statement of Investment Policies and Procedures (SIPP) can be replicated by passive index strategies. When capital markets deliver strong positive returns, achieving the policy benchmark returns, over the long term, should be sufficient to pay the Plan’s pension obligations. However, when markets weaken, returns achieved by active management rise in significance.
AIMCo strives to earn more than market returns by over or under-weighting specific investments in relation to the indices. AIMCo is expected to deliver a return of 85 basis points or 0.85% per annum, net of fees, in excess of the policy benchmark over a four-year time horizon.
AIMCo Investment Results
In 2019, AIMCo posted a return that was 0.52% below LAPP’s market-based policy benchmark return of 12.46%. Over a four-year period, net value added by AIMCo was 0.38% on an annualized basis.