AIMCo board undertaking third-party review of volatility trading strategy

The Alberta Investment Management Corp.’s board of directors has released a statement outlining its response to the poor performance of its volatility trading strategy.

In the wake of the coronavirus crisis, the strategy resulted in a loss of $2.1 billion or about two per cent of the AIMCo’s portfolio.

“Oversight of AIMCo’s investment strategies and risk management is the responsibility of the board of directors,” said the statement. “We deeply regret this result and are determined that the lessons from this experience will improve the corporation’s management processes and prevent any similar occurrences.”

Read: AIMCo calls reports of losses on volatility strategy ‘dramatically’ overstated

The board said its first priority is limiting the damage from the volatility trading strategy. It also confirmed that no other investment strategies it uses could “. . . generate substantial losses in very unusual circumstances.”

The board is also undertaking a comprehensive third-party review of the volatility trading strategy to identify what lessons can be learned and how those lessons can be leveraged to enhance the AIMCo’s investment and risk management processes.

The organization has tasked KPMG’s financial risk management team to perform an independent review and is calling on the expertise of Barbara Zvan, former chief risk and strategy officer of the Ontario Teachers’ Pension Plan, to support the board throughout the process.

The board is aims to have the results of this review and corresponding process enhancements to share with the AIMCo’s clients and shareholders by mid-June.

Read: AIMCo earns 10.6% return for 2019, underperforms benchmark