The LAPP fund is actively managed by Alberta Investment Management Corporation (AIMCo) – the Plan’s investment manager. The Board evaluates fund performance and measures the value added by AIMCo through its implementation of active investment management strategies. To evaluate AIMCo, the Board 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 Board. Note that not all asset classes included in the asset mix of the LAPP SIP&G 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.
In 2017, AIMCo posted a return that was 1.14% above LAPP’s market-based policy benchmark return of 9.0%. Active investing in Public Equities, Fixed Income and Inflation Sensitive and Alternative strategies contributed to this outperformance. Over a four-year period, net value added by AIMCo was 0.20% on an annualized basis.