Business

Into the future with the past in hand

Dan'l LaRocque,Ian Brown November 20 1978
Business

Into the future with the past in hand

Dan'l LaRocque,Ian Brown November 20 1978

Into the future with the past in hand

Business

Facing west in the chilly shadows of Toronto’s banks and Montreal brokerages, the vision gathers easily: hulking on the horizon, mecca for fundhungry business and governments throughout the land, nearly $5-billionworth of Alberta Heritage Savings Trust Fund is watching itself grow. Canada’s first financial Sasquatch started life in 1976 with $1.5 billion in assets and a ticket for 30 per cent of Alberta’s non-renewable resource revenues. By next spring it will be worth $4.7 billion; by 1980, $10 billion. As the fund’s $75-million loan to Manitoba last week rekindled their ardor, Easternbased brokers supine at the monster’s feet were again wondering when it would pay them heed. Others, not so supine, are asking themselves how much damage it will do first.

Facing east, from the unprepossessing Edmonton offices where Alberta Treasurer Merv Leitch, Deputy Treasurer Chip Collins and his assistant Allistair McPherson administer the fund, the perspective is very different. Leitch and company are accused of managing the fund too conservatively, but as the treasurer will point out in his spring budget the money is only for “the ensurance of future generations of Albertans. Look at it this way,” he will say, playing down the fund’s growth potential: “Five billion is one year’s budget in Alberta, five months in Ontario, one month in Ottawa. The trust fund is

equivalent to a person having one year’s salary saved when he retires. When our petroleum is gone, we have to have something to fall back on.”

How much that will be and how much it could be with a less conservative investment philosophy is a matter of serious debate, as is the gritty question of how many new investments the vast Alberta fund is siphoning off from less fortunate provinces. Most of the 80 per cent of the fund controlled by Leitch, Premier Peter Lougheed and the Alberta cabinet (the other 20 per cent buys parks, hospitals and other capital projects) is invested in relatively lowyield short-term debentures. Preferences include old favorites Alberta Government Telephones, Alberta Energy Co., and the bluest of bonds peddled after reassuring visits by the likes of McLeod, Young, Weir Ltd.’s Torontobased director responsible for Alberta, Peter Turner, and A.E. Ames & Co. Ltd. President Peter Harris. Leitch claims these investments netted the province an 8.8 per cent profit last year. No more than 15 per cent of the fund is available for out-of-province investments, of which the new loan to Manitoba, a $47million loan to New Brunswick, a $50million one to Newfoundland and possibly one to Quebec are but a pittance of total provincial needs. Lougheed is looking hard at port facilities investment in Vancouver and Prince Rupert, but risky foreign exchange

dealings and private enterprise (such as the oft-rumored silent-partner role in Robert Blair’s recent Husky Oil coup) are definitely out. “Our only equity position is with Syncrude and the Alberta Energy Co.,” Leitch declares flatly. “It is not our intention to interfere with the private sector.”

Many Eastern brokers consequently feel locked out where they’d most like to be in and charge Leitch with shortsightedness. In fact, he may be caught between a burgeoning Heritage Fund and a market for investment funds that so far is adequately served by the private sector. Secondary industry and the development of a capital market can wait as more and more chartered banks and trust companies set up offices and senior staff in the province along with the U.S. banks, eager for business. Despite Leitch’s disclaimer, the fund won’t shy from private sector investment much longer, as all observers expect Lougheed to back his old friend Robert Blair’s Alaska Highway pipeline.

Meanwhile, the fund has staff trouble. Two fund managers, including Assistant Deputy Treasurer Bob Splane, recently moved to the Edmonton-based Canadian Commercial & Industrial Bank. Splane took a pay hike of 35 per cent to become the bank’s vice-president and chief operating officer. While he says he moved for the challenge, insiders and other departees acknowledge the fund is having difficulty attracting quality staff to do the bigger job of investing a bigger fund with such low civil service salaries. As a result, the fund may take on special Crown corporation status that will allow for higher salaries. “It’s a huge fund,” one investment underwriter explains. “It has its problems. They’re going to have to manage it more imaginatively than they have in the past.”

Dan'l LaRocque/Ian Brown