AIMCo's VOLTS strategy lost $2.1B selling volatility — and the market never settled

AIMCo is the Alberta government-owned investment manager, overseeing pension assets, sovereign wealth, and other public funds for Alberta's teachers, public servants, and municipalities. It managed approximately C$120 billion in assets.

In 2008, AIMCo launched the VOLTS (Volatility Trading Strategy), an internally managed program that sold volatility protection — essentially insurance against market crashes — to Wall Street banks. The strategy collected premium income from selling options, generating steady returns in calm markets.

When COVID-19 struck in March 2020, market volatility spiked to unprecedented levels and stayed elevated. The losses from the short volatility positions accumulated rapidly and could not be offset by the gains that would normally materialize as volatility returned to normal levels. The strategy lost C$2.1 billion, about 2% of AIMCo's portfolio.

AIMCo CEO Kevin Uebelein acknowledged the losses in a letter to clients, calling them 'wholly unsatisfactory.' The board of directors completed a review of the strategy, and the VOLTS program was shut down.