Many Edmonton residents consider their city a “best-kept secret.” But what they may not realize is that their city has a secret of its own: much of what makes the city so compelling has been fuelled not by property taxes but by an incredibly successful investment program.
Sandy McPherson, chief investment officer for the City of Edmonton, has run that program for more than 10 years. McPherson presses the idea that he runs a team—and the results of Edmonton’s $2.5 billion investment program are the product of a team effort. McPherson’s leadership guides the investment strategy that undergirds the city’s growth, and that strategy is set to evolve.
Innovation is something of a constant for McPherson. Since a 2001 decision to bring a portion of the city’s funds under in-house management, the program has added roughly $210 million of value over and above policy benchmarks, and fee savings from internal management have amounted to more than $20 million. This round of innovation will provide increased value to his multiasset, multimanager investment framework in three principal ways.
First, the team will implement new strategies to improve the program’s diversification. This will broaden the opportunity set of the city’s investments and provide additional risk control. Second, the team will focus on active management where it believes the potential value is highest—akin to a “pay for performance” model. And third, McPherson will look to employ internal and passive management strategies, where appropriate, to draw upon his investment group’s expertise and increase cost savings.
McPherson, a lifelong Edmontonian, gets animated when he describes the projects his work will help sustain. “Edmonton’s new downtown development is really amazing,” he says. “We have $5 billion in projects planned or in progress to revitalize the city’s downtown, and the transformation will be incredible.”
“EDMONTON’S NEW DOWNTOWN DEVELOPMENT IS REALLY AMAZING. WE HAVE $5 BILLION IN PROJECTS PLANNED OR IN PROGRESS TO REVITALIZE THE CITY’S DOWNTOWN, AND THE TRANSFORMATION WILL BE INCREDIBLE.”
One iconic project, dubbed the Edmonton Arena District, will be anchored by a new state-of-the-art arena—Rogers Place—that will serve as the home of the Edmonton Oilers. Edmontonians are famous for their love of hockey, and soon they’ll cheer on their team from an outstanding, brand-new arena.
Meanwhile, the Valley Line Light Rail Transit will link downtown Edmonton to southeast Edmonton and West Edmonton. The city is one of Canada’s fastest-growing municipalities, and investments in transportation are essential to ensure the city’s successful growth.
The city is also breathing new life into a long-neglected area of downtown Edmonton called the Quarters. The city aims to transform the area into a vibrant, healthy community that is ready for its modern future while still respecting the history and character that makes the existing neighbourhoods unique.
The City of Edmonton has also launched an initiative that McPherson believes is as groundbreaking as the city’s Ed Tel Endowment fund creation in 1995, which helped ensure Edmonton’s long-term financial stability. The new initiative is called Blatchford, referring to the place that will launch the beginning of a new era of residential living in Edmonton. As one of the largest sustainable-development projects being planned in the world, Blatchford will transform how people connect with each other, with their city, and with the environment.
The $750 million in earnings that McPherson and his team have contributed to the city would require a property-tax increase of more than 7 percent to replicate. “The success of our investment program has helped leave money in the pockets of our citizens,” says Todd Burge, CFO for the City of Edmonton. “The city’s investment-management team has been able to generate income to help deliver capital projects Edmontonians depend on every day while avoiding the need for additional tax dollars.”
The connection between the City of Edmonton’s transformation and the success of its investment program is unmistakable. It seems that the program might have ended up as another “best-kept secret” for McPherson’s hometown. But now the secret is out.