AIMCo board undertaking third-party review of volatility trading strategy

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Economic Business Pandemic © lightwise /123RF Stock PhotosThe Alberta Investment Management Corp.’s board of directors released a statement outlining its response to poor performance from 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,” the statement said. “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.”

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

And third, the board is 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 AIMCo has tasked the 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 aims to have the results of this review, and corresponding process enhancements, to share with the AIMCo’s clients and shareholder by mid-June.

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