How Alberta’s AIMCo stays disciplined in a tough market

“You need to be buying when people are crying and selling when people are yelling”

AIMCo Chief Investment Officer Dale MacMaster

AIMCo Chief Investment Officer Dale MacMaster. (Portrait by Jason Franson)

Dale MacMaster insists his job is not that different from picking securities for a personal portfolio. While the chief investment officer of Alberta Investment Management Corp. (AIMCo) can buy things most people can’t—toll roads, office towers, stakes in private companies—he takes a value approach to buying, just as many retail investors do. “We like quality and we like value,” he says. “It’s like buying any asset—you want to get it cheaply and sell it for more money.”

MacMaster has a bigger weight on his shoulders than the average investor, though. He has to grow assets for 27 public-sector pension and endowment funds. At the moment, AIMCo has close to $80 billion in assets under management, an important bastion of stability in a province prone to booms and busts, where many families are right now worrying about their jobs and savings.

The Moncton-born, Montreal-raised MBA and certified financial analyst is well-suited to the job. He’s worked at AIMCo since 1998, the year oil prices plunged to US$10 a barrel. At the time, he oversaw fixed-income portfolios. MacMaster was then promoted to head of public markets and, eventually, private investments too. He became the company’s CIO—a newly created position—in January.

He’s noticed that over the years, the institutional and retail spaces have started to look more similar. Like institutions, individuals now have access to low-fee products such as exchange-traded funds (ETFs). Because of AIMCo’s size, fund holders pay just 35 basis points in fees. “Fees have the single biggest impact on investor returns,” he says. “It’s never been better for retail investors. ETFs put them on a level playing field with pension managers.”

MacMaster and his team are also always on the hunt for opportunities, as every investor should be. At the moment, he’s seeing value in the energy sector. The oil price collapse has made a number of companies more attractive. That applies to a greater degree on the public equity side—and he’s been buying—but private opportunities could pop up too, he says. If prices fall further, some companies may have to quickly sell off their real estate or infrastructure assets. There may also be opportunities in energy companies’ high-yield bonds.Graph showing portfolio details of Albert investment Management

Where institutional investors differ from retail is in the tools they can use to manage risk and increase return. MacMaster makes use of derivatives, which allow him to access parts of the market more easily and cheaply than investing directly. He also uses hedging strategies to help mitigate risk. Real estate assets can bring in a steady stream of income and, over long periods, enjoy big capital gains. He’s not overly concerned about liquidity. He’s chiefly interested in the 10- to 20-year horizon.

In this market, he expects returns of 5% to 8%. Bonds, he says, will return 1% to 2% at most, while stocks, which have become more volatile of late, will return between 6% and 8%.

That is a lower return than the past five years yielded, but MacMaster’s not worried. His most important tool, he says, is a strong investment discipline. He won’t panic when the market doesn’t go his way. Everyone on his team has strict, codified rules to follow in certain market conditions. “I can say, ‘You need to be buying when people are crying and selling when people are yelling,’ but there’s plenty of history to show that retail investors sell at the market bottom and buy at the top,” he says. “We don’t do that.”