Heritage Fund - Frequently Asked Questions

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?

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 August 26, 2009, the government released the Alberta Heritage Savings Trust Fund 2009-10 First Quarter Update that states the Fund's fair value stood at $14.3 billion as of June 30, 2009.

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Is the Heritage Fund forecast to grow in 2009-10?

Due to the strong growth in equities over the first quarter, the Heritage Fund is now forecast to earn net income of $1.34 billion in 2009-10, up from the $711 million forecast at budget.

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How much money is the government putting into the Heritage Fund this year?

As inflation is currently forecast to be negative for the year, there will be no inflation-proofing of the fund in 2009-10.

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How have the Heritage Fund investments performed over the first quarter?

Due to the rise in equity markets, the Heritage Fund had a return of 7.6 per cent this quarter. The fund outperformed its benchmarks in bonds, foreign equities, Canadian equities, hedge funds and money market securities. Canadian equities, which comprise 15.8 per cent of the fund’s investment portfolio, had the highest return of all asset classes, earning 22.9 per cent compared to the benchmark of 20.0 per cent.

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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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