(Bloomberg) -- It was supposed to be a bonding experience.
Evan Siddall, then-chief executive officer of Alberta Investment Management Corp., gathered about 170 senior staff at The Westin Edmonton for a meeting and an exercise on “how to lead from a place of joy” taught by The Moth, a nonprofit dedicated to the art of storytelling.
Things quickly turned joyless.
Nate Horner, Alberta’s finance minister, showed up to tell Siddall and three other executives they no longer had jobs. The four left the building after their phones and laptops were confiscated. Horner then broke the news to the remaining Aimco employees. He also dismissed the entire board.
The public purge sent a clear message: The government of Alberta is the boss, and it’s taking back control.
Horner has temporarily become the fund manager’s chairman and sole director, and the conservative regime that rules the Canadian province plans to overhaul the firm and cut costs.
“To restore confidence in the agency, Alberta’s government has decided to reset the investment corporation’s focus with a new CEO and board,” the government of Alberta said in a statement.
Canada’s biggest pension funds — dubbed the Maple Eight – have long been the envy of peers. They’re admired as among the world’s most sophisticated money managers, known for independence from politics, managing most of their assets internally, hiring world-class talent and paying top executives millions of dollars.
Aimco has invested with elite alternative asset shops such as Blackstone Inc. and KKR & Co.
Now Aimco is controlled by a populist government, which has been considering putting an ex-politician, former Prime Minister Stephen Harper, in charge of the board. The Edmonton-based firm manages about C$169 billion ($120 billion) of public pensions plans and government funds, all of which have a stake in who’s running the show.
“No well-run firm replaces all of its executive team and whole board at once,” pension expert Alexander Dyck, a finance professor at the University of Toronto’s Rotman School of Management, said in an interview. “That’s a recipe for disaster.”
Some staffers and government officials didn’t view the ousters as politically motivated, but rather as a responsible move after complaints about churn and cost under Siddall. Others see it as an attack on the Canadian model of independence that has helped the pension funds attract top talent.
Either way, the intervention has stoked panic among staff over their jobs and pay. In recent years, Aimco has lured people from firms such as Carlyle Group Inc., Royal Bank of Canada and Barclays Plc. Employees have already told acquaintances they want new jobs, anticipating the province will begin treating the pension manager like a state agency and slash their pay.
There are few leaders left at the firm who can reassure them.
Aimco has been without a permanent chairman since the end of last year, and its audit committee chair left in April. Even before last week’s deposition, Aimco experienced senior staff turnover under Siddall.
A chief legal officer and a chief corporate officer left during his tenure. Four different people held the title of chief investment officer in a little more than three years. The last, Marlene Puffer, departed in September as the Alberta government intensified pressure on the company.
To politicians, Siddall seemed disconnected from Alberta’s fiscally conservative culture, neglecting complaints about rising costs.
He grew corporate, non-investment functions and made splashy expenditures along the way, including renting an office in high-end tower One Vanderbilt in New York despite the reservations of some staff.
While an internal study showed the fund’s costs were near the bottom of its peer group in 2022, the appearance that it was spending lavishly posed a problem for the provincial government.
And it wasn’t the only issue. Siddall’s positive stance on green investing and his globe-trotting irked officials in oil-rich Alberta, who preferred their pension manager to keep a lower profile.
Along with Siddall, the other senior executives dismissed by Horner included the chief legal officer, the chief of staff and the chief people, culture and engagement officer. None of those executives worked on investments directly.
This story is based on conversations with multiple people familiar with Aimco and Alberta’s government. The people asked not to be identified to discuss confidential matters; some cited concerns over retaliation. A spokesperson for Aimco declined to comment.
New offices
Siddall, the former head of Canada’s federal housing agency, became CEO of Aimco in July 2021 after it lost C$2.1 billion on a bet against market volatility that blew up when the pandemic hit.
Fast-talking and blunt, Siddall aimed to elevate Aimco’s profile on Wall Street. Hired with a mandate to revamp the operation, he created new roles such as chief technology officer. While most of staff were in Edmonton, he wanted to attract people beyond Canada, too.
Early this year, Aimco opened the office in New York in One Vanderbilt. The real estate team had suggested at least five cheaper locations for the New York office, but Siddall thought it was important to have an office that attracted staff to work, according to people familiar with the matter.
Several months earlier, Siddall had opened an outpost in Singapore to focus on investments in Asia-Pacific. Aimco’s investments in Asia stood at around 3% of total assets as of last year.
He hired GIC Pte’s Kevin Bong to lead the efforts there. Aimco, which also opened an office in Calgary in 2022, has around 600 people working from seven offices, while giving them the flexibility to work remotely. In London, Siddall caught people’s attention with a renovation to accommodate more staff.
The global expansion suggested to some within the government that the pension fund was shifting priorities away from Edmonton, where its presence has supported the city’s economy. Aimco invests more than 40% of its assets in Canada, with a large chunk of that deployed in its home province.
Alberta Teachers’ Retirement Fund, one of Aimco’s clients, said in the past it has raised issues regarding costs with both the government and the fund. Aimco management has always been transparent about expenses, according to people close to the firm.
Aimco’s clients had asked for an almost doubling of allocations to private assets, driving more costs, according to a letter from former board Vice Chair Ken Kroner to government officials.
“Aimco hired the talent necessary to support this client-led growth, and this should not be misinterpreted as evidence of costs being out of control,” he wrote, adding that fees to outside managers grew at a slower pace than assets.
But as IT and human resources budgets added up, new expenses became a flashpoint.
Staff costs ballooned by 71%, and headcount grew by 29% from 2019 to 2023, according to a statement from Horner’s office. Third-party management fees also increased by 96% during the period.
Another source of friction: Aimco awarded a contract worth millions of dollars to BlackRock Inc. for its portfolio management software Aladdin.
Some insiders saw this as a necessary expense to replace an inferior risk-management tool. Others viewed it as an unnecessary contract that cost too much. BlackRock declined to comment.
Aimco spent C$276 million on salaries, wages and benefits in its last fiscal year, and awarded Siddall more than C$4.5 million in direct pay.
New York State Teachers’ Retirement System, a US fund that oversees a similar amount of money but relies more heavily on outside managers than Canadian funds, spent $59 million on salaries and benefits, according to its most recent annual report.
Aimco ultimately falls in the lowest third on cost relative to peers, according to a study by CEM Benchmarking for 2022, the latest such study available. Its costs were 23% lower than those of average peers.
As for returns, Aimco beat its benchmarks in two of the three years Siddall was in charge, and recent internal surveys showed employee morale substantially improving. That gave the board few reasons to question his investment judgment.
But for politicians in Alberta’s capital city, it wasn’t quite so simple.
‘First kick’
Alberta produces the vast majority of Canada’s crude oil — close to 4 million barrels a day — and its economy relies on fossil-fuel revenues for creating jobs and boosting growth. In fact, government royalties from oil and gas form a part of the pool of money Aimco manages.
The province is led by Premier Danielle Smith, a conservative and outspoken booster of the oil and gas sector who frequently fights with Prime Minister Justin Trudeau’s left-leaning government in Ottawa. Recently, Smith said she was “pissed” about federal draft rules to cap oil and gas emissions and vowed to challenge them.
Siddall didn’t embody Alberta’s conservatism.
A longtime public servant who has Parkinson’s disease, he increased the focus on human resources at Aimco and boosted diversity and inclusion initiatives — including hiring a chief people officer.
On Instagram, he posted photos from a COP climate conference in Egypt and reflected on Canada’s treatment of indigenous people.
While he rejected fossil-fuel divestment — a political non-starter in Alberta — he also pitched decarbonization as an attractive investment strategy.
In February, Aimco said it was creating a C$1 billion fund dedicated to the energy transition, including “low-carbon renewable energy production,” to be led by then-CIO Puffer.
Some clients complained to the government that the pension fund manager was steering away from Aimco’s principles. Others backed its direction.
Ultimately, Horner sided with the first group. The government has for months been mulling giving the chairman’s role to Harper, according to people familiar with the matter. He’s a longtime politician who led the Conservative Party of Canada to three straight election victories — and he’s deeply trusted by conservatives in Alberta.
The finance minister waited for an opening. Then came last week’s purge at the Westin hotel. More changes are certain, potentially destabilizing Aimco further.
“You’re kicking at the foundation, and the concern is that when you kick at the foundations enough, at some point they’re all gonna fall down,” said Dyck, the pension expert, speaking about Canadian pension funds in general and their history of political non-interference. “It’s just, this is the first kick.”