2022 Year in Review
| Assets Under Management | Investment Income |
|---|---|
| $17.1 Billion | $(0.7) Billion |
| 1 Year | 4 Year | |
|---|---|---|
| Portfolio Return | (4.5) % | 6.0 % |
| Benchmark Return | (5.9) % | 6.3 % |
| Added Value | 1.4 % | (0.3) % |
By the end of 2021, a very buoyant year in equity markets, some uncertainty about the investment environment going forward appeared as post-pandemic supply chain issues and labour shortages led to rising inflation. In 2022, the fear that inflation may become entrenched, compounded by Russia’s invasion of Ukraine, led the US Federal Reserve and other central banks to raise borrowing costs. Interest rate increases brought an end to the era of cheap money that followed the financial crisis of 2008 and had pushed up the prices of all risky assets.
As a result, the re-pricing of risk in 2022 was painful for investors. Unlike 2008, when the market slump was concentrated on equities and fixed income assets provided diversification, equity and bond markets tumbled in 2022. Some relief came from inflation-sensitive exposures as Infrastructure, Real Estate and Renewable Resources asset classes generally performed well against the economic backdrop.
The weakness in equity and bond markets contributed to a poor year for PSPP’s investment portfolio. The negative total return of (4.5) % was supported by a fourth quarter recovery and was well above PSPP’s Policy Benchmark return of (5.9) %. Alberta Investment Management Corporation (AIMCo), PSPP’s legislated asset manager, realized outperformance versus benchmarks across asset classes.
Many of AIMCo’s strategies contributed significant positive outperformance versus underlying benchmarks while very few strategies did poorly. The largest contributors to excess return were in Private Markets, specifically Infrastructure, Renewable Resources and Private Debt.
Poor investment performance in 2022 had a negative impact on PSPP’s long-term results. However, four-year performance remains healthy at 6.0%. Despite significant value add of 1.4% in 2022, poor performance relative to PSPP’s Benchmark in both 2020 and 2019 has resulted in AIMCo underperforming PSPP’s four-year annualized benchmark return of 6.3% by 0.3%.
