EDMONTON -- Alberta's public pension manager has lost millions after investing in smaller energy companies at a time when the entire sector is in decline, an analysis has found.

The analysis by the left-wing think thank Progress Alberta found that Alberta Investment Management Corporation, or AIMCo, has invested $1.1 billion in junior and intermediate oil and gas firms since 2016.

Most of those companies lost value well before the COVID-19 crisis and oil supply war that has driven the commodity's price to record lows. At least one company has gone bankrupt despite the injection of tens of millions of pension dollars.

“The vast majority of them were in really rough shape before the crisis,” said Duncan Kinney, one of the authors of the think tank's report released Wednesday.

AIMCo controls about $118 billion in 31 pension, endowment and government funds, including the Alberta heritage fund, a rainy-day account financed by oil and gas royalties. It is intended to be run at arm's-length from the government.

The previous NDP government brought in a provision that stipulated a small portion of AIMCo's funds be used to support new jobs, infrastructure and industry in the province.

The report says that of the $406 million invested under the Alberta Growth Mandate, nearly $270 million - two-thirds - went to the energy sector.

Of the 32 separate investments made under the NDP provision, five were in real estate, one in agriculture and one in renewable energy. The rest were in oil and gas and all have lost value.

One, Trident Exploration, went under last year despite a $60-million injection of pension funds. Others have had to renegotiate their debt. Others, such as Pieridae Energy, in which AIMCo has invested $120 million in debt and equity, are high-risk investments, says the report.

Many have large environmental liabilities that can no longer be shuffled off in bankruptcy due to a recent Supreme Court of Canada ruling.

AIMCo CEO Kevin Uebelein has previously acknowledged his funds are disproportionately invested in Alberta.

He has said local managers are able to find good investments where those outside the province can't, giving AIMCo what he called a “home-field advantage.”

Kinney disputes that. He pointed out that AIMCo has consistently failed to meet targets for returns set by one of its largest clients, the Local Authorities Pension Plan for public employees of villages, towns, cities, hospitals, college and school boards.

Kinney also questions the agency's independence from government.

He notes there is legislation that gives politicians significant influence in AIMCo, unlike the Canada Pension Plan. Recent laws introduced by the United Conservatives give the finance minister power to reassign portions of AIMCo's portfolio to a manager of the government's choice.

As well, pension funds under AIMCo's control are no longer free to seek other management.

“AIMCo is not a truly independent pension fund manager,” Kinney said.

In an email, AIMCo spokesman Denes Nemeth disputed that.

“AIMCo operates at arms-length from the government, on commercial terms and with complete operational independence, in particular as it relates to investment decisions, and always in the best interests of clients.”

Kinney noted that several of the companies that have received AIMCo investments are financial supporters of the UCP or of groups that support the party.

“Those companies are in the tank for UCP,” he said. “The links are troubling.”

Nemeth denied any political influence.

“There is absolutely no merit to the suggestion that AIMCo selects investments on the basis of what political party a particular company may support.”

AIMCo reported a return of 10.6 per cent for its various clients in 2019.

The Progress Alberta analysis came out the same day as the Globe and Mail reported that AIMCo had lost $4 billion in risky trades made since the COVID-19 pandemic and oil price crash. Sources told the newspaper that AIMCo acknowledges its executives were not fully aware of the risks.

The Globe said the loss wiped out about one-third of the fund's profits from last year.

This report by The Canadian Press was first published April 22, 2020.