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

Recent reports of significant investment losses on the part of the Alberta Investment Management Corp. are overblown, according to chief executive officer Kevin Uebelein.

In recent weeks, many Canadian publications have pointed to problems with a volatility strategy that performed poorly amid the massive spike in volatility that equity markets have experienced due to the coronavirus pandemic.

“This occurred because the losses that quickly accrued as market volatility dramatically increased and remained elevated were not able to be offset by the gains that would normally be realized as volatility returned to more typical levels,” said Uebelein, in a press release. “Markets behaved in a manner never-before-seen and the result was a very unfortunate loss.”

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But the losses from that strategy have been entirely overstated, by between 43 and 100 per cent, according to Uebelein, “Realized and unrealized losses combined to date are approximately $2.1 billion of the $118.8 billion of assets we manage on behalf of our clients. While that figure will likely change, we have actively taken a number of steps to limit the eventual loss. Actual losses will not be finalized until the strategy is completely wound down, which should occur by mid-June.”

While the strategy’s outcome is certainly disappointing, he pointed out the AIMCo is suddenly working in a highly unusual investment environment, which reaffirms its commitment to diversification within the portfolio.

“As an independent investment manager, AIMCo takes full responsibility for the investment losses incurred by this strategy. Over the past few weeks, we have focused on implementing measures to minimize the potential losses from this strategy and across our entire portfolio, while honouring our commitment that our clients remain fully informed of our results.”

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