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.
The investment is balanced 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 investments in private and public companies, bonds, real estate, and infrastructure investments. A little more than half of the Fund is invested in equities. Historically, equities have outperformed fixed income securities over the long-term as investors are paid a risk premium to hold stocks. See the Detailed List of Investments at March 31, 2010, which was released with the 2009-10 Heritage Fund Annual Report.
