2023 Year in Review
| Assets Under Management | Investment Income |
|---|---|
| $18.4 Billion | $1.7 Billion |
| 1 Year | 4 Year | |
|---|---|---|
| Portfolio Return | 9.2 % | 5.3 % |
| Benchmark Return | 10.3 % | 5.4 % |
| Added Value | (1.1) % | (0.2) % |
Following the aggressive interest rate hiking cycle carried out by central banks in 2022, investors began to see signs that monetary policy was taking hold. Inflation appeared to be dampening without triggering a recession. Despite the optimism, inflation and rising rates continued to be a concern. However, most global economies remained resilient as reflected by strong corporate profits and wage growth outpacing inflation. Interest rate hikes ended mid-year, and by the end of the year the likelihood of a recession seemed low as the prospect of further relief from near-term interest rate cuts became priced into capital markets.
As a result, Equity and Fixed Income markets experienced a strong recovery following the sharp downturn of 2022. However, after providing an element of relief in 2022, valuations in inflation- sensitive exposures of Infrastructure, Real Estate and Renewable Resources asset classes suffered against the backdrop of higher interest rates.
The strength in equity and bond markets contributed to a solid year for PSPP’s investment portfolio. However, the total return of 9.2% was 1.1% below PSPP’s Policy Benchmark return of 10.3%. The poor performance versus the Benchmark was driven by Alberta Investment Management Corporation (AIMCo), PSPP’s legislated asset manager, experiencing underperformance across inflation-sensitive asset classes.
AIMCo’s Public Equity and Fixed Income strategies contributed modest outperformance versus underlying benchmarks. Real Estate and Infrastructure strategies were the most significant contributors to underperformance at the total portfolio level.
Strong investment performance in 2023 helped to balance the poor performance of 2022. However, the four-year total portfolio performance of 5.3% is slightly below long-run expectations. Poor performance relative to PSPP’s Benchmark in 2023 has contributed to AIMCo underperforming PSPP’s four-year annualized benchmark return by 0.2%.
