The Alberta government is launching a review of the investment policy for Alberta’s Heritage Savings Trust Fund, which was battered by heavy losses earlier this year.
At the fund’s annual general meeting in Edmonton on Thursday, Alberta Treasury Board and Finance assistant deputy minister Lowell Epp announced his department will launch a “major review” of the $17-billion fund’s overall investment strategy and asset portfolio.
The review will be the first of its kind since 2011. It comes after a year that saw the Heritage fund — a rainy-day account financed by oil and gas royalties — pummelled by COVID-19 and risky investment decisions.
Seven years of gains were wiped out from the portfolio this spring after a volatility-based investment strategy left the fund’s investments vulnerable to the economic toll of the pandemic.
“There is a legislative requirement to invest the Heritage Savings Trust Fund in order to maximize long-term earnings with a prudent level of risk,” Jerrica Goodwin, a spokesperson for Treasury Board and Finance, said in an emailed statement Friday.
“This internal review will take place over the next year and will only evaluate how the fund is invested. This is not a review of the purpose of the fund, how it is used, nor will it consider changes to legislation.”
Kevin Uebelein, CEO of the Alberta Investment Management Corporation (AIMCo), which manages the Heritage fund, said he only learned of the review at Thursday’s meeting but wasn’t surprised.
The review could result in changes to the fund’s overall asset mix, and how much risk its investments are allowed to take, Uebelein said.
“That kind of review, which is going to be thinking about the investment thesis, the investment policy, and then ultimately, the asset allocation that comes from that policy — those are all the responsibility of the Alberta government,” Uebelein said in an interview Friday.
“How does that impact the investment philosophy of the Heritage fund? Those are conversations that hopefully both the government and AIMCo will be able to have together.”
AIMCo operates at arm’s-length from the government. In addition to the Heritage fund, it manages 30 other government investment funds, along with three huge public sector pension plans for nearly 375,000 Albertans.
Uebelein said AIMCO’s investment strategy was ill-equipped to handle the unprecedented economic volatility caused by the pandemic.
AIMCo has succeeded in taking measured investment risks for years but this past year was the exception, he said.
The fund’s weakness was in an investment strategy that saw it make bets against volatility in the markets. This spring, amid unprecedented swings in the market, AIMCo lost billions on derivatives, investments that pay off only if stock prices remain stable.
‘An extremely painful lesson’
“It had been for many years quite a successful strategy. And then there was a week in March, I remember it, it’s sort of tattooed in my psyche,” Uebelein said.
“The world experienced volatility like it really never seen before and a strategy that had been a perennial winner really was quite a large loser.
“That strategy is shut down now … And that was an extremely painful lesson.”
AIMCo came under fire this spring when it lost $2.1 billion on the volatility-based investment strategy.
The missteps cost the Heritage fund $411 million. In combination with global market losses in February and March, the fund was valued at $16.3 billion on March 31, its lowest point since 2011-12, according to the fund’s most recent annual report, released in July.
The value was down about 10 per cent from the same time last year.
The value of the Heritage fund dropped $1.9 billion during 2019-20 — $1 billion was transferred to the province’s general revenue fund, and net losses, including unrealized losses, were $887 million for the fiscal year.
The investment breakdown included 44.8 per cent in equities, 19.5 per cent in fixed income and money market and 34.9 per cent in inflation-sensitive and alternative investments.
‘A marathon recovery’
Uebelein said AIMCo has already analyzed its losses extensively and is making changes to the investment portfolio.
“Accountability includes being willing to talk about what happened, what we’re doing,” he said.
“It includes making the necessary changes to the organization to make sure that those things never happen again and that we will learn and that we improve from that.”
The Heritage fund has slowly started to recover. As of June 30, the fund was worth $17.2 billion.
Investment income for the quarter was pegged at $4 million with a five per cent rate of return.
Despite the gains, Uebelein said it will take years for the account to fully recover.
“You know, that may sound quite promising, but I just have to say, the recovery for the Heritage fund is really quite like the recovery in all of our lives and the economy writ large,” he said.
“We’re in a marathon recovery here. It’s not going to happen overnight. And we have to find a gear so that we can grind through this.”
India Stymies Investment From Hong Kong Amid China Border Row – BNN
(Bloomberg) — India is subjecting foreign investment proposals from Hong Kong at par with China as part of a new policy that makes approval mandatory for plans from countries that share a land border, a person with the knowledge of the matter said.
Nearly 140 investment proposals valued at over $1.75 billion, mostly from China and Hong Kong — China’s special administrative region — have been put on hold pending scrutiny, the person said asking not to be identified citing rules on speaking to the media.
Amid a border stand off with China, the Indian government tightened rules for foreign direct investment from all nations sharing a land border, making scrutiny mandatory for such investments — a restriction that was earlier applicable only to Pakistan and Bangladesh.
The delays may complicate deal-making and impact the flow of capital from private equity firms and hedge funds, which often include investors domiciled in China or Hong Kong. This may starve Indian companies of investment in the midst of the pandemic-induced economic contraction.
The curbs also apply when the beneficial owner of the proposed investment is situated in any of India’s neighbors. A government panel constituted to approve these proposals is yet to decide on the rules including on beneficial ownership.
The trade and industry ministry spokesman didn’t immediately answer a call made to his mobile phone.
READ MORE: China Gained Ground on India During Bloody Summer in Himalayas
Tensions between the two giant Asian economies have been escalating since May. Twenty Indian soldiers and an unknown number of Chinese troops were killed in clashes along the Himalayan frontier earlier this year.
The military crisis is the worst since the two sides fought a war in 1962. India responded by banning Chinese apps, tightening visa rules for Chinese nationals and imposing curbs on companies from nations sharing a land border from bidding for government contracts.
Earlier last month, Foreign Minister Subrahmanyam Jaishankar had told Bloomberg News that trade with China can’t carry on in business-as-usual mode as long as there are unresolved issues along the border — a disputed 3,488-kilometer (2,167-mile) stretch known as the Line of Actual Control.
©2020 Bloomberg L.P.
Billionaire Bezos Backs Start-Up in Maiden Africa Investment – BNN
(Bloomberg) — Jeff Bezos agreed to back Africa-focused financial technology company, Chipper Cash, making it his first start-up investment on the continent.
The world’s richest man’s personal venture capital fund, Bezos Expeditions, supported the Series B funding led by Ribbit Capital, which raised $30 million for the San Fransisco-based company.
“Jeff Bezo’s backing of Chipper Cash will widen the company’s product suite through inclusion of more business payment solutions, crypto-currency trading options, and investment services,” the company said in an emailed statement.
Chipper Cash enables instant cross-border mobile money transfers in Africa and abroad and will use the funds for expansion into countries it will announce in 2021. The company has 3 million users on its platform across Ghana, Uganda, Kenya, Tanzania, Rwanda, Nigeria and South Africa, and processes an average of 80,000 transactions daily, according to the statement.
“We are responding to the demand from customers on our P2P platform who also have business enterprises,” Chipper Cash Chief Executive Officer Ham Serunjogi said in the statement.
Read more: Visa Partners With Payments Startup Chipper in African Expansion
©2020 Bloomberg L.P.
Dot Investing Launches Digital Platform Allowing Individuals to Access Investment Opportunities Usually Reserved for Institutions – Business Wire
LONDON–(BUSINESS WIRE)–Dot Investing, a fintech startup, has launched an online investment platform that allows individual investors to invest in top private and alternative asset funds, including private equity, VC and hedge funds. Users are able to invest from £100,000 into opportunities that historically had far greater minimum investment requirements. The team behind the FCA-regulated startup want to democratise access to investments that until now have only been easily accessed by institutions.
Falling interest rates and volatile markets are driving demand from individual investors for access to top-tier private assets and alternative funds. Dot Investing is one of a small number of next generation investment platforms that provide the access and tools required to meet this demand. On the other side of the equation, the fintech startup opens the door for fund managers to a pool of capital worth trillions of pounds.
Each investment opportunity listed on the platform has passed Dot Investing’s proprietary due diligence process, combining technology and in-house expertise. Users must meet with qualifying investor criteria and make their own decisions on where to invest funds, however they do so with the knowledge that each opportunity presented has been vetted by experts. The majority of investment opportunities will come from top-tier private equity and alternative asset funds, users of Dot Investing will also enjoy regular access to ESG and impact investing funds.
Dot Investing was founded in London by a team with broad experience from a range of financial institutions including Blackrock, Barclays and JP Morgan.
Kinson Lo, founder and CEO of Dot Investing said, “We believe our technology can empower investors to build more diverse, resilient and better performing investment portfolios. Our digital platform opens access to investments that for too long have been the preserve of institutions. The combination of expertise and technology we provide arms investors with the insights to invest like a sophisticated institution.”
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