Questions and Answers

Albertans have questions about their Heritage Fund.   We've answered a few of the most common questions here.

FAQ Index

• Did you know?
• What is the Heritage Fund's mission?
• What is the value of the Alberta Heritage Savings Trust Fund?
• Did the Heritage Fund grow in 2007-08?
• Did the Heritage Fund earn investment income in 2007-08?
• How much money did the government put into the Heritage Fund in 2007-08?
• What happens to the investment income earned by the Heritage Fund?
• How is the Heritage Fund invested?
• Who keeps track of the Fund's investments?
• Are these investments secure?
• Why did the government conduct another public consultation on the Heritage Fund?
• How do I find out more?

 

Did you know?

The Alberta Heritage Savings Trust Fund is unique to Alberta. No other province has such a fund.

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What is the Heritage Fund's mission?

The statutory mission of the Heritage Fund is:

"To provide prudent stewardship of the savings from Alberta's non-renewable resources by providing the greatest financial returns on those savings for current and future generations of Albertans."

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What is the value of the Alberta Heritage Savings Trust Fund?

On June 24, 2008, the government released the Alberta Heritage Savings Trust Fund 2007-08 Annual Report that states the Fund's fair value stood at $17 billion as of March 31, 2008.

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Did the Heritage Fund grow in 2007-08?

Yes.

As detailed in the Alberta Heritage Savings Trust Fund 2007-08 Annual Report, the Heritage Fund grew by $1.384 million on a cost basis, which includes $918 million in deposits from the government’s surplus and $466 million for inflation proofing.

On a fair value basis, the Fund grew by $463 million, which includes the increases shown above offset by a decline in unrealized capital gains of $921 million.

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Did the Heritage Fund earn investment income in 2007-08?

Yes.

On a cost basis, the Fund earned realized investment income of $824 million in 2007-08, of which $466 million was retained in the Fund for inflation-proofing and $358 million was transferred to the Province’s main operating fund, the General Revenue Fund.

On a fair value basis, the Heritage Fund’s realized investment income of $824 million was offset by the decline in unrealized capital gains, resulting in a market value loss of $97 million, or negative 0.7%.  The Heritage Fund's average annual return over five years was 11.1%.

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How much money did the government put into the Heritage Fund in 2007-08?

The government allocated $1.4 billion to the Heritage Fund in 2007-08, including $466 million for inflation proofing.

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What happens to the investment income earned by the Heritage Fund?

The investment income earned by the Heritage Fund, less the amount retained in the Fund for inflation proofing, is transferred to the province's main operating fund, the General Revenue Fund, to help pay for priority programs.

Over the past 31 years, investment income from the Heritage Fund has benefited Albertans in many ways. Approximately $30 billion in investment income has been transferred to the province's General Revenue Fund to support program spending in areas such as health care, education, infrastructure, debt reduction and social programs.

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How is the Heritage Fund invested?

The investment objective of the Fund is to optimize long-term financial returns subject to an acceptable level of risk.

It is a balanced plan based on two important concepts: diversification to manage risk, and a long-term planning horizon to earn greater returns.

The Heritage Fund's portfolio consists of stocks, bonds and real estate, private equities and absolute return strategies.

About half of the Fund is invested in equities. Historically, equities have outperformed fixed income securities over the long-term.

A good example of this would be $100 invested in bonds in 1925 would be worth approximately $6000 today; however, if the same $100 were invested in the equity markets, it would be valued at over $170,000.

By legislation, Alberta Finance and Enterprise operates under the "Prudent Person Rule". This assigns to the investment manager the responsibility to restrict investments to assets that would be approved by a prudent person.

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Who keeps track of the fund's investments?

The investment portfolio of the Heritage Fund is managed by a group of highly qualified and experienced professionals in the Alberta Investment Management Corporation. See AIMCo’s website for more information on its responsibilities.

The Ministry of Finance and Enterprise is responsible for the Fund and its investments. The Minister of Finance and Enterprise is required to report on the performance of the Fund quarterly within 60 days of the end of the quarter and make public the annual report within 90 days of the end of the fiscal year.

The Standing Committee on the Alberta Heritage Savings Trust Fund reviews and approves the business plan and annual report of the Fund. The Standing Committee has representation from the major parties of the legislature. The Standing Committee receives regular reports on the performance of the Fund and conducts public meetings on an annual basis in different locations in the Province. The purpose of these meetings is to update Albertans on the management of the Fund and to solicit input from Albertans.

The business plan of the Heritage Fund is published as part of the provincial budget and the income of the Fund is consolidated into the revenue of the Province.

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Are these investments secure?

As mentioned previously, the key to sustainable performance is maintaining a diverse portfolio with a long-term focus, prudence, and investment discipline.

The Heritage Fund has a significant commitment to equities because it is managed to earn higher returns over the long-term. Equity investments can lead to variations in the amount of income earned from year to year, but they are proven to earn greater returns. Therefore, steps are taken to manage any risk and protect the Heritage Fund's assets. The Fund's managers make investment choices based on the Prudent Person Rule, which means they only make investment choices that would be made by a prudent investor. Also, assets are held across market sectors. The government doesn't, as the expression goes, "put all its eggs in one basket".

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Why did the government conduct another public consultation on the Heritage Fund?

The government first asked Albertans about the future of the Heritage Fund in 1995. From the consultation entitled, "Can we interest you in an $11 Billion Decision?", Albertans told government to keep the Fund, but they also told government to take another look when the province's financial picture was more certain.

The financial situation of the province is in order, so it was time to look at the Fund again.

Looking Forward: Planning the Future with the Alberta Heritage Savings Trust Fund was conducted in the fall of 2002, and the results were released in March 2003.

Over 77,000 Albertans responded to this survey on the Heritage Fund's future. Overall, the results show that most Albertans (61 per cent) want the Heritage Fund to continue to operate as an endowment fund.

Albertans value the Heritage Fund, and it is government's responsibility to ensure it will continue to play an important role for future generations.

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How do I find out more?

You can find out more about the Heritage Fund by mail, phone, fax or email, or by contacting your MLA's office.

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