Alberta fund logs first loss in 27 years

Gary Park, Petroleum News Calgary correspondent

Alberta’s Heritage Savings Trust Fund, its equivalent of the Alaska Permanent Fund, took a heavy blow from stock market investments, reporting a net loss of C$894 million for fiscal 2002-03.

The fund value now stands at C$11.1 billion, compared with C$12.7 billion in 1986 and a peak C$12.9 billion in 2000, but, after factoring in inflation and purchasing power, the nest-egg is estimated to have declined by 40 percent over the past 17 years.

Revenue Minister Greg Melchin said the first loss in the fund’s 27-year history was “disappointing,” but he insisted it can “handle (the) volatility” of investments that are intended for 10- to 20-year cycles.

He said the loss will not harm Albertans at a time of significant budget surpluses for the government.

The fund was established in 1976 to building a financial cushion for future generations from an oil boom, but as commodity prices slumped in the 1980s capital infusion to the fund stopped.

In 1986, the fund would have covered 95 percent of the province’s spending; in 2003 it will barely cover 50 percent.

Now, instead of being set aside for the long-term, the fund’s returns are being used to cover today’s expenses.

In addition, the fund has increasingly gambled by moving its assets into equities and away from safe interest-bearing bonds.