DID YOU KNOW….

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

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."

WHAT IS THE VALUE OF THE ALBERTA HERITAGE SAVINGS TRUST FUND?

On November 15, 2006, Finance Minister Shirley McClellan released the Alberta Heritage Savings Trust Fund 2006-07 Second Quarter Update  that states the Fund’s fair value stood at $15.4 billion as of September 30, 2006, an increase of $2.8 billion from September 30, 2005.

Investment income is expected to be $1.15 billion, an increase of $237 million from the Fund’s original budgeted income at the beginning of the fiscal year.

Budget 2006 included a $1 billion deposit into the Heritage Fund. In September, $400 million of this amount was transferred to the Fund, along with $250 million for the advanced education endowment.

Net 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. For 2006-07, $283 million will be retained in the Heritage Fund for inflation proofing.

Since the Heritage Fund was created in 1976, nearly $29 billion has been allocated to fund Albertans' fiscal priorities including debt repayment. The Heritage Fund played a large role in the province becoming debt free.

IS THE HERITAGE FUND FORECAST TO MAKE MONEY THIS YEAR?

Yes.

The Alberta Heritage Savings Trust Fund 2006-07 Second Quarter Update forecasts investment income of $1.15 billion.

Net investment income earned by the Heritage Fund, less the amount retained for inflation proofing, is transferred to the Province’s main operating fund, the General Revenue Fund. For 2006-07, $283 million will be retained in the Heritage Fund for inflation proofing.

HOW MUCH MONEY IS THE GOVERNMENT PUTTING INTO THE HERITAGE FUND THIS YEAR?

The government has committed to a $1 billion deposit into the Heritage Fund from the estimated 2006-07 fiscal year surplus, along with a $283 million allocation to the Fund for inflation proofing. This is on top of a $1 billion deposit and $382 million for inflation proofing in the 2005-06 fiscal year.

The Access to the Future Act was proclaimed on October 6, 2005 and provides for the transfer of up to $3 billion from the General Revenue Fund to the Heritage Fund for the purpose of supporting post-secondary education. In 2005-06, $750 million was placed in the Heritage Fund for the advanced education endowment. An additional $250 million was deposited into the Fund in September 2006.

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 30 years, investment income from the Heritage Fund has benefited Albertans in many ways. More than $28.6 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.

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 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.

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 Alberta Finance's Investment Management Division (IMD). External managers (specialized private sector investment managers) are also used to manage specific investment mandates.  See the Provincial Investments section for more information on IMD's responsibilities.

The Ministry of Finance is responsible for the Fund and its investments. The Minister of Finance 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.

An Investment Operations Committee (IOC) was established to add private sector financial and business oversight of the Fund's investment policies and operation. The IOC is chaired by the Deputy Minister of Finance and consists of private sector members. The Committee reviews and makes recommendations with respect to the business plan, annual report and investment policy statements for the Fund, meeting at least quarterly to review performance and fund management.

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."

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.

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.