Monday, October 22, 2018

Strip-Mining US Public Pensions?

John W. Schoen of CNBC reports, Public pensions are paying higher fees for lower returns, Pew study finds:
Public pension plans are spending more than $2 billion a year in fees on high-cost, risky investments to boost returns. But those bets haven't been paying off, according a report Wednesday from the Pew Charitable Trusts.

The higher cost comes as public pension fund managers try to make up for a steep shortfall brought by years of underfunding and lackluster investment returns.

As of fiscal 2016, the latest data available, state pension funds tracked by Pew had a combined $1.4 trillion deficit – up $295 billion from 2015 and the 15th annual increase in pension debt since 2000. State public pension plans have assets of just $2.6 trillion to cover total pension liabilities of $4 trillion.

To try to make up that deficit, state pension fund managers have shifted investments away from the traditional mix of stocks and bonds to a greater reliance on alternative investments like hedge and private equity funds. Between 2006 and 2016, the average plan has raised its share of alternative investments from about 11 percent of assets to 26 percent (click on image).

That shift has also raised the cost of managing pension fund assets. In addition to the $2 billion, some funds are paying undisclosed performance fees, according to the Pew study, which makes the total cost impossible to measure. It's also difficult to compare the full cost of managing these investments, Pew noted, because some funds report their returns without factoring in management fees, while other report after subtracting those fees.

Despite paying higher costs, pension plan performance has fallen. Among the funds Pew studied, none met its investment target. The shortfall has left many retirement systems owing more in liabilities than they can afford to pay out, in some cases much more (click on image).

Pension fund systems in New York, South Dakota, Tennessee and Wisconsin had enough to cover at least 90 percent of their liabilities in 2016, while pension funds in Colorado, Connecticut, Illinois, Kentucky and New Jersey were less than 50 percent funded, according to Pew.

Another 17 states had less than two-thirds of the assets needed to pay future retirement benefits. Kentucky and New Jersey had the lowest funded ratios among states at 31 percent and Wisconsin had the highest at 99 percent.

Here's how the 73 funds tracked by the Pew study stack up. Hover over a state for details (click on image).

This article came out almost a month ago but someone in the US asked me to look into the state of state pensions and it has gone from bad to worse.

The only good news is bond rates are rising this year which means liabilities are declining but that can quickly change if a crisis occurs at which points bond yields will drop precipitously and asset values will get clobbered (the perfect storm for pensions).

As far as US pensions getting less bang for their alternatives buck, I've already discussed this at length in a previous comment of mine on the big squeeze.

For three decades, the hedge fund and private equity elites rode the 2 & 20 model to fame and vast fortunes but nowadays, only the very top fund managers can still command such fees and even they are finding it hard to justify.

Most big institutions are paying closer to 1 & 10 nowadays. Maybe not to Bridgewater, Citadel and Blackstone but even they are offering better fee structures to their big clients.

In a low rate, low return world, it's simply criminal to pay 2 & 20 even to the likes of a Jim Simons or Steve Cohen.

But fees aren't the main problem and I believe in paying fees for performance. The biggest problem with US public pensions is their approach to alternatives, particularly private equity.

Most of Canada's large public pensions pay big fees to their private equity partners but unlike their US counterparts, they leverage those relationships to gain more access to large private equity co-investments, a form a direct investing where they pay no fees.

So, when you hear Canadian funds are going direct in private equity, it's not that they stopped paying fees to private equity managers and are going purely direct. This is pure nonsense. They need Blackstone, KKR, TPG, and other top private equity funds and pay them big fees for their fund investments but they then leverage that fund relationship to gain access to great co-investment opportunities where they can scale into big deals and pay no fees, lowering their overall fees in the asset class.

So why aren't US pensions doing this? The short answer is they can't because they don't pay their pension staff adequately to quickly analyze co-investment opportunities so they need to look at other ways to do this like what CalPERS is trying to do bringing PE in-house.

My main message is that fees are fine as long as risk-adjusted returns are there over the long run but you need to approach private equity in a much more intelligent way than just doling out big fees for mediocre or even median returns.

As far as hedge funds, it's a very tough environment, so paying out big fees may be justified for top funds but most hedge funds are not doing well relative to the overall market and they're not delivering alpha (more like bad beta).

It can be argued the hedge fund industry has gotten too big for its own good and institutional investors have spoiled the party.

I'm more cynical. I happen to firmly believe the bulk of hedge funds suck and I do mean suck! They're nothing more than glorified asset gatherers who are not able to consistently deliver stable and compelling risk-adjusted returns and when they do, beware of fraud or at the very least be very skeptical.

Admittedly, with all major central banks engaged in QE since 2008, it hasn't been the best environment for hedge funds but I'm tired of hearing excuses from grossly entitled hedge fund managers raking their clients on fees and delivering mediocre results.

I honestly wonder how many hedge funds have an "edge" in these markets. Very few.

Having said that, there will be dislocations and opportunities as central banks remove liquidity, so some hedge funds will shine but good luck finding them.

It's a very tough game and anyone who tells you otherwise is a fool.

And it doesn't help when articles come out on how Wall Street drove public pensions into a crisis or how a gang of hedge funds strip-mined Kentucky's public pensions.

You read these articles and realize how utterly corrupt the system is and how incompetent many US pension fund managers and their board of trustees are.

It's a scandal, the crime of the century and very few realize it because they're hopelessly unaware of the "pay to play" shenanigans that looted their public pensions for years.

I've said it before and I'll say it again, all the reforms in the world in US public pensions are worthless unless you first get the governance right and get politicians out of managing them in any way, shape or form.

You can read more on the Pew report here. You can also read different opinions like this one which says Pew got it wrong, pension funds need alternative investments.

They need alternatives but they need a new approach to lower overall fees via more co-investments and to do that, they need to get the governance right to attract talent to their public pensions. Period.

Below, the American dream has drawn millions to the “land of opportunity” and long encapsulated the idea that every citizen has the right to improve their lives. Yet, the current state of the US retirement system may threaten the ability of some to fully achieve the American dream by ensuring their health and quality of life in retirement. The traditional three-legged stool of retirement—social security, pension, and retirement savings—is transforming into a wobbly one-legged stool, with personal savings and investment providing the only retirement security.

On October 16, the Center on Regulation and Markets at Brookings hosted Kara Stein, commissioner at the US Securities and Exchange Commission, to give her perspective on how the SEC can best provide that assistance. Following Stein’s remarks, Brookings Senior Fellow Martin Baily joined her onstage for a discussion. After the discussion, Stein and Baily took questions from the audience.

And PBS FRONTLINE investigates the role of state governments and Wall Street in driving America’s public pensions into a multi-trillion-dollar hole. Marcela Gaviria, Martin Smith, and Nick Verbitsky go inside the volatile fight over pensions playing out in Kentucky, and examine the broader consequences for teachers, police, firefighters and other public employees everywhere.

The Pension Gamble will be airing Tuesday, Oct. 23 (check local listings). 

Thursday, October 18, 2018

PGGM Questions Over-diversification?

Wouter Klijn of 3i reports, PGGM Questions Over-diversification and Benchmarks:
PGGM is serious about long term investing.

The fund takes a 10 to 15 year view in its investment objectives and even longer in their climate targets. After all, pension funds are about building up wealth over a 40 – 50 year period for the individual member, so there is no point in short term performance.

Or as the EUR 218 billion (AUD 350 billion) pension fund puts it in its annual report: value creation is only relevant when it concerns long term value creation.

But the industry’s historic focus on measuring its investment performance against the dominant benchmarks might not put funds in the best position to optimise long term benefits.

“We define, collectively as asset owners, the market cap benchmark as the measure of all things. I think we are overdoing that job,” Jaap van Dam, Principal Director Investment Strategy at PGGM says in an interview with [i3] Insights.

“Being very well diversified is not the same as being very close to the global benchmark. Being well diversified means that you try to build a portfolio that is very robust in all kinds of circumstance in the capital markets, and it is even the question whether the global market cap benchmark does a good job at that.

“So, I think as an industry we should become a bit more critical about the dominance of market cap benchmarks,” Van Dam says.

Fine Tuning the Factors

PGGM has been moving to factor-based investment strategies since the global financial crisis and despite the difficulties these strategies have faced over the last 12 months, Van Dam is convinced it is the right approach over the long term, as some factors take time to play out.

“We’ve started implementing them on a large scale from 2008 so we’ve got quite a long experience and so far they have by and large delivered what we were expecting. That makes the comfort level internally quite large,” he says.

“We try to build as much as possible on the outcomes of academic work and the reasoning of what is behind these academic factors. That being said, I think we should always keep our minds open to whether success depends on a single set of circumstance and always be prepared to think again and improve these things.

“But the idea that certain subsets of the equity universe over the long term will deliver a higher return or the same return at a lower risk than the market as a whole, I think that is a very sound idea. The shape in which you harvest it might change over time.”

Reducing the Number of Assets

As part of the fund’s drive to optimise the portfolio for the long term, PGGM has created a separate sleeve that contains fewer assets. Although still small at only five per cent of the total equity portfolio this sleeve aims to have more concentrated positions, while having a deeper relationship with company management.

“I tend to think that asset owners are over-diversified,” Van Dam says. “If you look at the MSCI World, it invests in 2100 companies and if you halve that number, or even divide it by eight, you can still build extremely well diversified portfolios.

“So if you say, we will allocate a bit less to these extremely diversified portfolios, which by the way should always be the basis for a good portfolio, and in exchange for that you build a portfolio that is more focused and where you try to be this steward which harvests additional returns that may come from a deeper and more meaningful relationship with a company, then I think you are doing well justified things that don’t come at the cost of diversification.” he says.

Since the global financial crisis, there have been several attempts at creating an investment framework that is more robust over the long term. For example, The 300 Club, an investment think tank that questions whether current financial and investment market theory and practice will protect investors in the years ahead and of which Van Dam is a member, has focused on the work of British economist John Kay.

In this approach, asset owners argue that there is some premium to be harvested due to the fact that they can be a steward of their assets, at least in the public markets.

“In the long term, it means you build a relationship with the companies that you own and you engage in a strategic dialogue,” Van Dam says. “By doing that you can nudge companies to generate a higher long term value than if you wouldn’t be there.

“It doesn’t only count for the long term financial results, but part of this movement is also emphasising the societal returns that can be enhanced by thinking along these lines. Financial and societal returns on the long term can go hand in hand. If you look through that lens at PFZW (Pensioenfonds Zorg en Welzijn, the pension fund for which PGGM manages the assets) we do some experiments, but we don’t do that on a large scale yet,” he says.


PGGM also believes that in-house management can aid in getting better long term outcomes and has been building a number of factor strategies in-house.

“If you look at the way we work right now, then, yes, we have brought some of the asset management in-house. For example, to be able to design and build your own factor strategies is intellectual property that pays off,” he says.

“There is also an element of cost-effectiveness by bringing things in-house. Then, if we look at the next generation of long term investing, where we act as steward and active owners, we do this both internally and externally, because we want to see what works best in the long term.

“But my feeling is that that will work best when you have a short investment chain and I think your oversight and control of the dialogue with the people that actually do this will be better if you have these people very close to you. So my tendency is to bring that internal,” he says.

Quality Control

Van Dam acknowledges that bringing asset management functions in-house also means insourcing certain risks.

“I think you bring agency risk in-house and the clear risk of that is that you are not as critical of what you are doing internally as when you externalise things. Emotionally, it is much easier to say: ‘goodbye’, when you are externalising.

“So I think you need a very strong countervailing power to the teams which you bring in-house.

“Of course, if the board of trustees would be able to do that that is great, but in practice I think it requires quite a lot of effort, so a board of trustees should be assisted by a function, that we call the ‘fiduciary advice function’, and they essentially act as quality control.

“That means that we try to have a control of quality of the internal teams at all times. If you are building internal IP, then you can work on continuous improvement. The fact that you are manufacturing it in-house means that you have quality control and continuous improvement, while if you buy it externally, to a certain degree you buy things off the shelf.”

The Very Long Term

Arguably, two of the most topical long term trends are climate change and technological disruption, with the latter already causing direct and profound changes in how funds invest.

Van Dam believes that big data and artificial intelligence will, and already has, changed the way people invest, but also questions how much long term benefit investment teams will draw from these developments.

“To a degree it is an arms race; it won’t lead to better, sustainable value creation,” he says.

But the more pertinent concerns centre on the ability of technological change to disrupt entire industries and again Van Dam has reservation about the ability of broad, established indices to address this problem.

He believes that an exposure to just the five big technology companies doesn’t negate this risk.

“If you look at the global benchmarks, then the companies, on average, are a bit older and maybe a little bit more vulnerable to technological disruption. The new companies are formed more in the private investment space, the venture capital or private equity space,” he says.

“They tend to stay private a little bit longer than historically was the case. So I’ve got the feeling that just putting your money in a public benchmark could lead to quite high technology risks and perhaps you may be underexposed to the opportunities that new technology will bring, by not being exposed to venture and private equity,” he says.

“I’ve had quite a few conversations about this both internally and with international peers. A lot of people ask this question, but I don’t think many have an answer that is so sound that it can be applied on large scales. But you do see experiments,” he says.

Climate Risks

PGGM has been quite active in addressing the risks of climate change and its focussed, long term equity portfolio includes many investments that could be seen as impact investments, although the fund prefers to call them ‘Investing in Solutions’ assets.

“Over the past five years, we’ve done two very important things: one is that we have halved the carbon footprint in our public equities portfolio and because that is a passive portfolio that was relatively easy,” Van Dam says.

“We are also in the process of quadrupling our impact investing in climate change, which means owning wind farms and sun farms. These were two very important movements I think,” he says.

Although PGGM has considered climate risks for a long time, this has been given additional impetus by government proposals to become a carbon-neutral country by 2050.

“Right now, we have written the internal climate strategy, where we say that in all parts of the portfolio we should have an awareness of what climate change could do to that part of the portfolio and how you can cope with that and then integrate it into your investment process.

“One of the parts of the portfolio that is very prone to being influenced by climate change is real estate.

“What we are doing there is we have a cooperation with one of the universities in the Netherlands and bring big data into play which for all the locations of the objects that we own, either directly or indirectly, can map flooding risk or extreme temperature risk.

“This is still work in progress, but I think within a year we will have a very clear idea of where the risk lies and this will help us manage the portfolio going forward. These are slow-moving processes, but they should influence your investment process, I think.”
This is an excellent interview with Jaap van Dam, Principal Director Investment Strategy at PGGM.

PGGM and APG are two well-known Dutch pension funds that have been around for a very long time. Along with Denmark's ATP, they are considered part of the best pension funds in the world.

Van Dam covers a lot here and it's worth reflecting on everything he covers. In fact, every large investor struggles with these concerns. Are you over-diversified? Are you diversified properly across public and private markets? Does diversification kick in when you most need it? Are the benchmarks you're using appropriate or are they too weighted to technology?

As far as factor investing, APG is pushing the limits but PGGM has been moving to factor-based investment strategies since the global financial crisis and despite the difficulties these strategies have faced over the last 12 months.

And to be clear, it's been a rough 12 months for factor investing and some think the risks of factor investing are usually understated (perhaps, severely so), and the diversification benefits tend to be overstated.

Over the long run, however, it's clear that these funds have embraced factor investing and believe in its diversification benefits.

In fact, Van Dam is convinced it is the right approach over the long term, as some factors take time to play out.

He might be right but over a year or two, a lot of wonky things can go wrong with factor investing and there are so many quantitative hedge funds and other large asset managers trying to gain an edge using smart beta and other factor investing techniques that they tend to water down results.

Others will disagree with me but I can't help but believe when everyone jumps on a bandwagon, long-term returns suffer.

As far as climate change, here too PGGM and APG are global leaders and they have done a lot to assess the risks across their public and private portfolios.

It's interesting that he discusses real estate at the end because at the conference I attended a couple of days ago (see my comment here), Richard Burrett was telling me even though One World Trade Center is LEED gold, Superstorm Sandy flooded it, so not a lot of thought when into flood risks.

He was also telling me how by the end of the century, ocean water will rise six inches and a lot of cities including London aren't prepared.

I told him I watched a CBS News clip this week where a NASA scientist was telling the reporter the Antarctic ice sheet is discharging more than two Olympic-sized swimming pools worth of ice into the ocean every second.

Below, I embedded that clip. You know my thoughts on climate change, we're beyond screwed and it's too late to reverse the damage.

Also, PGGM Investments' Jaap van Dam speaking at P&I's 5th annual Global Pension Symposium discusses building a sustainable asset allocation how the advanced allocation strategies used in the US and Europe can provide a model for Japanese pension funds. You can watch this clip here

Wednesday, October 17, 2018

CPPIB and the Caisse Focus on EMs?

CPPIB put out a press release, Driving long-term value creation through investor-corporate dialogue in Brazil:
How long-term value creation can be driven by investor-corporate dialogue was the subject of an October 9 discussion with senior executives from Brazilian corporations at CPPIB’s Sao Paolo offices.

A McKinsey Global Institute analysis of 615 large- and mid-cap U.S. publicly listed companies from 2001 to 2015 shows clearly that focusing on the long term reaps economic benefits.

The study finds that between 2001 and 2015, companies classified as long term added nearly 12,000 more jobs on average than other firms. Similarly, they found the market capitalization of long-term firms grew $7 billion more on average between 2001 and 2014 than that of other firms.

Still, an FCLTGlobal survey of more than 1,000 executives and directors globally finds short-termism remains pervasive – 87% of respondents say they feel pressure to demonstrate strong financial performance within two years or less. This is an 8% increase from 2013’s survey results.

Our President and CEO Mark Machin and Rodolfo Spielmann, Managing Director and Head of Latin America, shared these findings to prompt discussion on practical actions shareholders and companies can take to drive long-term value creation in Latin America.

There was general agreement among participants that interactions between shareholders and corporations in Latin America are effective, given the ownership structures and economic conditions that are unique to the region.

The engaging discussion ranged from the short-term pressures facing Latin American corporations, to the differences between how public companies and private companies view the issue.

Participants also shared their experience and discussed effective ways to promote long-term behaviour.
Brazil is one of the emerging markets CPPIB has plans to grow its allocation in over the next few years.

It's not the only pension fund interested in Brazil. Bloomberg reports French utility Engie SA and a the Caisse plan to offer as much as $9 billion (34 billion reals) for Petrobras’s natural gas pipeline network, potentially a $1 billion boost from their initial bid.

Apart from Brazil, there is a keen interest in India and China. The Caisse just increased its stake in Azure Power Global Ltd. (Azure Power), a leading player in solar energy, to 40% through a US$100 million contribution to the company’s recent capital raising. This new investment in Azure Power brings the total amount invested by CDPQ to US$240 million:
Azure Power is one of India’s largest independent solar power producer with a pan-Indian portfolio of more than 3 GW spread across 23 Indian states. With its in-house engineering, procurement and construction expertise and advanced in-house operations and maintenance capability, Azure Power provides low-cost and reliable solar power solutions to customers throughout India. It has developed, constructed and operated solar projects of varying sizes, from utility scale, rooftop to mini & micro grids, since its inception in 2008.

“Through this investment, we are reaffirming our commitment to Azure Power and our willingness to support its growth. Azure Power is a leader in the fast-growing sector of solar power in India, a priority market for CDPQ, and has a high-quality management team that possesses thorough knowledge of the industry. Furthermore, this transaction fits perfectly with CDPQ’s desire to contribute, as an investor, to a global low-carbon economy,” said Mr. Emmanuel Jaclot, Executive Vice-President, Infrastructure at CDPQ.

“CDPQ’s successive investments into Azure Power since we went public on NYSE in 2016 are a strong testament of our leading solar power platform in India. CDPQ’s new investment enables our continued organic growth of highest quality solar power assets and our contribution towards realization of India’s Hon'ble Prime Minister's commitment towards clean and green energy", said Mr. Inderpreet Wadhwa, Founder, Chairman and Chief Executive Officer at Azure Power.
I just covered how Canadian pensions have crossed an important ESG threshold and it's fair to say that the Caisse is taking the lead in terms of impact investing by signing a big deal with Al Gore’s Generation Investment Management.

The Caisse has explicitly stated it aims to cut its carbon footprint by 25% by 2025 and its leader, Michael Sabia recently sounded the alarm on climate change but also stated it represents an economic opportunity and pensions need to invest in these opportunities.

His counterpart at CPPIB, Mark Machin, has pledged a 'huge push' on climate change risk assessment:
Canada Pension Plan Investment Board chief executive Mark Machin pledged Thursday to step up the assessment of global climate change risks to make better investment decisions, as the fund he oversees posted an annual net return of 11.6 per cent.

“We’re going to make a huge push on it this year… We want to do a much better job of being able to understand the risks that we’re taking on in each investment and the risks we have embedded in the portfolio, and make sure we’re being paid for them,” Machin said in an interview.

“If we’re not being paid for the risk, then it doesn’t make sense to own them. Others, where we think we’re being paid for the risk, then we’ll continue to own them.”

He said much more work needs to be done on key questions including how quickly the “energy transition” from traditional sources to alternatives and renewables will take place. This will be influenced by a number of factors, from geography to government policy and regulation to social demands.

“Nobody’s cracked this, nobody’s got a great tool kit yet, so we’re having to develop it ourselves,” Machin said.

“We don’t think it’s going to happen by next year. We think there’s still going to be a role for oil and gas related assets for some period of time. But how fast that transition happens is one of the key drivers, and then we need to understand all the other risks embedded in each investment.”

CPPIB, which invests money for Canada’s national pension scheme, is pairing its plan to build better ways to measure the risks inherent in sectors such as oil and gas with a concerted search for more investments in alternative and renewable energy assets.
CPPIB has a long-term focus and its strategy and this is why it needs to pay attention to climate change risk, just like all other pensions.

Its long-term focus is also why it is aiming to double its allocation to China by 2025. During a recent trip to Beijing, Mark Machin spoke to China Daily's Jiang Xueqinq about how the fund plans to lift its China investments:
CPPIB plans to increase funding across country as it eyes long-term market opportunities from growing middle-income group, aging population.

By 2025, Canada Pension Plan Investment Board plans to have 20 percent of its estimated C$800 billion ($612 billion) assets invested in the Chinese mainland, Hong Kong, Macao and Taiwan, said Mark Machin, president and CEO of CPPIB.

"It's a sensible thing to increase our supply to this market. We are building expertise, and we think valuation is not perfect in this market, so there are opportunities for skilled investors to find really good value," Machin said during a recent business trip in Beijing.

The further opening-up of China's financial markets to foreign investors has also increased the CPPIB's confidence in making greater investments in the world's second-largest economy, he said.

China is also undergoing significant population changes, including a growing middle-income group and an aging population. With expected spending increases in education, financial services, health and elderly care, the Toronto-based global investment manager is eagerly eyeing China's growth markets.

Currently, the CPPIB's asset allocation in China is broadly diversified, with investments in the A-share market through both the Qualified Foreign Institutional Investor program and the mainland-Hong Kong stock connects. The institutional investor is starting to participate in the bond market via the bond connect program and has access to the interbank market.

In an interview with China Daily, Machin shared his views on China's pension system and further opening-up, as well as the CPPIB's investment strategy in the country.

What experience could China learn from the Canadian pension system?

The Canadian pension system was developed all the way back in the 1890s. There has been a lot of experience gained, lessons learned and mistakes made over the years.

One of the things we learned is that a multi-pillar system is the way to go. So it's important to have a system where you have the government system, plus company pensions, personal pensions, life insurance, etc. All of those need to be developed and work alongside each other. You can't just have one pillar providing everything, and you need some type of consistency across those, and incentives that work to encourage people to save.

The other thing is the way that pensions are managed in Canada. Government-related pensions are unique in that they are put at arm's length from any government involvement in the investment process. The governance is very strong. It allows the building of expertise and professional management of the funds.

What are the major challenges facing China in terms of the pension system?

The main challenge at the moment is the returns that the various parts of the pension system earn. Due to a limited range of investments, the returns are pretty low on a lot of pensions.

Another challenge is that the funding of the system continues to need improvement. I think the transferring of a part of State-owned enterprise ownership to the National Council for Social Security Fund is a very good move. That will help to improve funding for the overall system.

The consolidation of provincial pension systems to be managed centrally is a good move as well, so they can be managed with transparent, strong and robust governance.

What will be the effect of China's policies to further open up its financial markets to foreign investors like CPPIB?

The opening-up is really, really good and will encourage more and more investors to invest here. It's an important moment for China to decide whether to really open up or whether to slow down the opening-up, given internal and external challenges.

I encourage much more bold opening-up, which will improve the vigor of the economy here and the strength of the markets.

Right now, about 8 percent of our funds are invested in the Chinese mainland and about 10 percent of our funds overall are invested across the Chinese mainland, Hong Kong, Macao and Taiwan. We expect the latter to increase to 20 percent by 2025.

We are already involved in the QFII and the mainland-Hong Kong stock connects. We have joint ventures here in logistics and real estate. We have invested in companies like Alibaba and Postal Savings Bank of China. We have a very broad portfolio here across many aspects, and we're going to continue to grow that over time.

The more open China is, the more confidence we have to deploy more money here. We expect to have up to a third of the fund invested in emerging markets by 2025, and China will be at least half of that.

Your investment portfolio in China seems to be a major bet on the country's consumption growth. Right now, there is sentiment that China's consumption is downgrading. How do you view that?

Our investment portfolio in China shows the demographic trend of the growing middle-income group. The typical sectors we are looking for are the ones that are going to be exposed to the rise of middle class prosperity.

People are going to spend more on education, financial services, and both online and offline retail. We are also looking at healthcare and other services that would be important for the aging population. For example, in Europe we have invested in a long-term care provider ORPEA, which has already established operations in China.

Right at this moment, if we were a short-term investor, the consumption would be a doubt. But in the longer term, with the growing prosperity of the country over time, there will be demand for consumption growth in these areas. I don't think there will be a downtrend of consumption over time.

What is CPPIB's plan to invest in services for the aging population in China?

I'd like us to find ways of investing in this aging demographic. It's something that should be really aligned to what we do and our expertise. We haven't found the best business model and the best partner to work with yet, so we continue to explore it.

A lot of people have been trying to find a business model that works. It's not just real estate development. There are a number of models whereby you try to keep people living as independently for as long as possible in communities; and when they can't live independently, there is assisted living; and when they need end of life care, the healthcare is there. It can all be in one community that works well and is near family as well.

We have invested in Europe in the end of life care. It's high-end and a combination of healthcare and old age care.

We have a lot of research around the world in aging demographics. I'll give you an example that you won't expect: In the US, as baby boomers are aging, a lot of them want to go and see Europe. One of the best ways to see Europe is to go on a riverboat. So we invested in a company called Viking Cruises, and a huge number of passengers are aging US citizens.
That is a very interesting interview which gives you a lot to ponder because 2025 is just around the corner.

If CPPIB achieves its goal of allocating a third of its assets into emerging markets by 2025, half of which will be in China, it needs to find the right partners across public and private markets to do so.

You might think this is an ambitious goal, and it is, but have a look at the current snapshot of global economies (h/t, Kelly Trihey via The Visual Capitalist, click on image):

As you can see, the economies of China, India and Brazil are still below that of the US economy but they're catching up fast and will overtake it.

"But Leo, you just wrote a comment about the market topping out and stated you‘re nervous about the Fed overdoing it with rate hikes and think emerging markets are still a short despite the selloff."

Yes, and I stick to those macro views but that is short-term, not long-term. CPPIB, the Caisse, and Canada's large pensions aren't managing for the next year or three, they are managing billions for the long run and need to maintain that long-term focus on emerging markets.

Does China make me nervous? Yes, it's still a communist country and my personal investments will always be in the US stock market because my personal bias is the US economy is the best economy in the world and it will remain so for a very long time.

Having said this, China is growing by leaps and bounds and in some areas, like e-commerce and renewables, it's already leading the world or close to it. And there are big advantages of having a command economy when governing over 1.4 billion people. You get things done quickly.

At the CAIP conference I attended yesterday, one of the speakers, George Varino, Head of Emerging Market Solutions at Investec Asset Management, had an interesting presentation on China and distributed an interesting report titled "China: The Second Great Transformation" (listen to an Investec podcast here).

He brought up many excellent points on how the country is growing its middle class and how services now account for a large extent of the economy and how they are addressing their high debt and shadow banking system.

Admittedly, he's bullish on China for a reason, so I take some points with a dose of skepticism but other secular trends are hard to deny, especially the growing middle class (think he said 20 million people a year but don't quote me).

Perhaps what worries me most is the possibility that the US and China are at risk of a '10- or 20-year' economic cold war, which is something former Fed governor Kevin Warsh told CNBC recently.

Similar concerns were raised by D.J. Peterson, Longview Global Advisors founder and president, on  'Squawk Box' this morning as he weighed in on geopolitical risks to the market regarding China and Saudi Arabia.

These are all valid concerns but in the end, Trump or no Trump, there is no denying China needs the US and the US needs China to thrive over the long run.

Lastly, Mark Machin wrote an excellent op-ed recently on how CPPIB is advocating for more women on boards. I encourage you to read it.

I also want to bring to your attention something Marlene Puffer, President and CEO at CN Investment Division posted on LinkedIn from the Canadian Gender & Good Governance Alliance, a CEO blueprint for gender diversity:
This is a blueprint for CEOs who understand that implementing gender balance throughout their organization is important. It will give you a step-by step framework on the components of building a vision, structuring and mobilizing management teams and focusing on gender diversity initiatives that actually work.

Building a gender diverse organization is more than the morally right thing to do. A conclusive body of evidence indicates that diverse organizations tend to be more innovative and perform better financially than their peers. Your customer base reflects growing social diversity, and you need to respond to stay competitive.

If you are a publicly traded company, your investors might already ask for your gender diversity policies before buying your shares. And in the global race for talent, organizational diversity will be a key recruitment tool.

Designed to help frame a CEO's agenda on gender diversity, the CEO Blueprint outlines three key steps and provides tactics throughout for:

1. Building your vision
2. Making it mission critical
3. Focusing on high impact practices

This guide can show you how to take advantage of leading practices for your organization.
You can can download the guide here. it is also available in French.

They should create a similar blueprint for minorities including people with disabilities.

I call on all organizations, especially Canada's large and mighty public pensions to set firm goals to hire more women at all levels and a lot more people with disabilities (that's easy from the current 0.01%).

Anyway, another discussion for another day.

Below, Mark Machin, Canada Pension Plan Investment Board president and chief executive officer, discusses the pension plan's investment strategy and global interest rates with Bloomberg's Erik Schatzker on "Bloomberg Markets" at the Bloomberg Global Business Forum in New York on Sept. 26, 2018.

And Mark also discusses why CPPIB put money in Viking Cruises because of a trend it noticed involving aging US Baby Boomers.

Lastly, D.J. Peterson, Longview Global Advisors founder and president, joins 'Squawk Box' to weigh in on geopolitical risks to the market regarding China and Saudi Arabia.

Take the time to listen to all the discussions and remember, CPPIB is in it for the long run and despite what Keynes once said, it, the Caisse and other large Canadian pensions need to focus on the long run.

Tuesday, October 16, 2018

Canadian Pensions Cross ESG Threshold?

Aaron Kirchfeld and Alastair Marsh of Bloomberg News report, Al Gore's Generation, Caisse de dépôt teamed up to acquire fintech FNZ:
Al Gore’s Generation Investment Management LLP and Canadian pension fund Caisse de dépôt et placement du Québec teamed up to acquire control of wealth-management services provider FNZ in one of the year’s largest fintech deals.

The acquisition of a two-thirds stake held by the private equity firms General Atlantic and HIG Capital values FNZ at around $2.2 billion U.S., according to a statement from the companies Tuesday that confirmed an earlier report by Bloomberg News.

The deal is the first investment to be made by a new partnership formed by Canada’s second-largest pension fund and the investment firm co-founded by former U.S. vice-president Gore and former Goldman Sachs Group Inc. partner David Blood. The duo plan to deploy $3 billion initially for investments with an 8-to-15-year duration, taking a longer view than the typical private equity deal.

The FNZ agreement adds to a surge in fintech transactions, which totaled more than $39 billion in the first half amid investments in payment processing, financial data and machine learning, according to a report from advisory firm Hampleton Partners.

FNZ, founded in New Zealand in 2003 by Adrian Durham, provides services to asset managers, banks and insurers including behemoths such as Aviva Plc, Barclays Plc and Vanguard Group Inc. The capital infusion will help FNZ tap a bigger share of the $30 trillion global market, according to Durham.

“The deal will help us grow share in the wealth-management platform market to trillions versus hundreds of billions,” said Durham. “You have to be a scale player.”

Durham and the firm’s 400 employees plan to retain about a third of the company following the transaction. FNZ joined in a 2009 management buyout with HIG Capital, while General Atlantic provided an additional investment in 2012.

HIG, which initially injected less than 10 million pounds in FNZ’s equity, is now selling its stake for about 450 million pounds, according to a person familiar with the matter, who asked not to be identified because the transaction was private.

JPMorgan Chase & Co. advised the sellers.
The Caisse put out a press release, CDPQ and Generation Investment Management make long-term investment in FNZ:
La Caisse de dépôt et placement du Québec (“CDPQ”) and Generation Investment Management LLP (“Generation”) have today announced the acquisition, subject to regulatory approval, of General Atlantic and H.I.G. Capital’s investment in FNZ, in a deal valuing the company at £1.65 billion. The acquisition, which is one of the world’s largest FinTech transactions this year, represents the first investment by CDPQ-Generation, the unique, sustainable equity partnership announced today by CDPQ and Generation.

FNZ is a global FinTech firm, transforming the way financial institutions serve their wealth management customers. It partners with banks, insurers and asset managers to help consumers better achieve their financial goals.

The business has grown rapidly in recent years, as its institutional customers have used FNZ’s platform to improve transparency, choice and drive down long-term costs for consumers of wealth management products across all segments: from mass-market workplace pensions to mass-affluent and high-net-worth clients.

Today, FNZ is responsible for over £330 billion in assets under administration (AuA) held by around 5 million customers of some of the world’s largest financial institutions, including Standard Life Aberdeen, Santander, Lloyds Bank, Vanguard, Generali, Barclays, Quilter, UOB, Aviva, Zurich, UBS, BNZ, Findex and FNZC. In total, FNZ partners with over 60 financial institutions across the UK, Europe, Australia, New Zealand and South-East Asia.

FNZ was founded in New Zealand in 2003 by Adrian Durham and FNZC, New Zealand’s leading investment bank and wealth manager. To accelerate growth, the company partnered in a management buy-out with H.I.G. Capital in 2009. General Atlantic provided additional investment in 2012. Today, the company has over 1,400 employees in the UK, Czech Republic, Shanghai, Singapore, Australia and New Zealand. Around 400 employees are shareholders, who will continue to own about one third of the equity of the company following this transaction.

FNZ expanded from New Zealand to the UK in 2005, initially partnering with Standard Life Aberdeen and basing its UK operations & technology in Edinburgh. The company was a significant beneficiary of the UK’s global leadership in the consumer regulation of financial advice. The 2013 retail distribution review (RDR) improved fairness, transparency and costs for consumers of financial advice and has been followed around the world, including recently in Europe with the introduction of MiFID2.


Adrian Durham, CEO and founder of FNZ said: “We started FNZ by asking: how can technology solve the problems faced by consumers of long-term savings products? We saw investors being charged so much that their retirement income was halved by charges alone. They were no better off than a bank deposit, despite taking risk and investing in managed funds for over 30 years. Choice was non-existent and the entire value chain was managed using paper.

Our approach has entirely digitised the value chain, reducing cost and complexity for financial institutions and consumers alike. Our clients have all moved to Platform-as-a-Service (PaaS) combining cloud-based software with transaction and custody services. This frees them to focus purely on their customer proposition, transferring all the technology, transaction & asset servicing to FNZ.

This unique PaaS approach, combined with regulatory change, has reduced total consumer costs in long-term savings by around 40% over the last decade. It has transformed the accessibility, choice and transparency of a consumer’s long-term savings.

We see a unique opportunity to create a global-scale platform for wealth management. This requires a willingness to invest for the long-term. The firm’s 400 employee shareholders are firmly committed to this outcome and CDPQ-Generation is the perfect partner, given its unique 8-15 year time horizon and focus on sustainable investments.”

Stephane Etroy, Executive Vice-President and Head of Private Equity at CDPQ, said: “We have researched the best global financial services technology businesses with a focus on companies that have long term, truly global-scale potential. We are extremely excited to partner with FNZ management team to build a business over a time period which is not typical for either private equity or public equity businesses. Through our newly announced partnership with Generation, we are creating a new model of sustainable equity investing which reflects the ethos of both companies, and is ideally suited to the objectives of long term sustainable value creation.”

David Blood, Senior Partner and Co-Founder at Generation, said: “FNZ represents an outstanding first investment for our new partnership. It is an exceptional company with a management team that has demonstrated its ability to innovate and grow in the fast-moving FinTech sector. We believe our long-term approach will suit the company and allow it to continue to invest in its technology and service proposition to the benefit of savers and pensioners, as well its employees, customers and investors”.

About FNZ

FNZ is a global FinTech firm, transforming the way financial institutions serve their wealth management customers. It partners with banks, insurers and asset managers to help consumers better achieve their financial goals.

FNZ's technology, transaction and custody services enable their clients to provide best-in-class wealth management solutions to financial advisers, end-investors and the workplace that are efficient, flexible, transparent and scalable, supporting market, demographic and regulatory trends worldwide.

Today, FNZ is responsible for over £330 billion in assets under administration (AuA) held by around 5 million customers of some of the world’s largest financial institutions, including Standard Life Aberdeen, Barclays, Lloyds Bank, Vanguard, Generali, Quilter, Santander, Aviva, Zurich, UOB, UBS, Findex and BNZ.

In total, FNZ partners with over 60 financial institutions globally and employs over 1,400 in London, Edinburgh, Bristol, Basingstoke, Sydney, Melbourne, Wellington, Hong Kong, Singapore, Shanghai and Brno.


Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at June 30, 2018, it held CA$308.3 billion in net assets. As one of Canada's leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. For more information, visit, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.
About Generation Investment Management

Generation is a sustainability-focused investment management firm, founded in 2004. It is an independent, private, owner-managed partnership with offices in London and San Francisco. Its approach to active investment management is focused on long-term performance and based on an investment process that fully integrates sustainability analysis into decision-making. It is dedicated to generating long-term success by investing in sustainable businesses that provide goods and services for a low-carbon, prosperous, equitable, healthy and safe society. As of June 30, 2018, Generation managed appx US$20 billion of assets on behalf of professional investors globally.

This was a huge deal that was brought to my attention last week by Geoffrey Briant, President and CEO of G2 Alternatives Advisory Corp.

Geoff shared this with me:
It's definitely different. 8-15 year hold for PE instead of the usual 10 years. So-called "sustainable equity" investments. A partnership...not a fund. GIM invests in public and private investments.

In the CDPQ 2017 Stewardship Investing Report - its first ever - CDPQ states they want to take "concrete action" on the "international stage". If that is what as intended, this Impact Investment may qualify for meeting that commendable and profitable objective.
You will recall Michael Sabia, the Caisse's CEO, came out recently to sound the alarm on climate change. His message was simple, climate change is real and it's not just a risk but also an economic opportunity and pensions need to invest in these opportunities.

Anyway, Geoff Briant invited me to the CAIP conference being held in Montreal today. You can view the agenda here.

I typically avoid these conferences like the plague (they're dreadfully boring) but I wanted to hear the panel on ESG as well as listen to Pierre Lavallée, the CEO of the Canada Infrastructure Bank.

Pierre gave an excellent overview of the CIB, its mandate to invest $35 billion over the next ten years in revenue generating infrastructure projects.

He talked about the $1.28 billion, 15-year loan to the Caisse's REM project and how they learned a lot from that deal to help them with other greenfield infrastructure projects.

He said they will invest across the capital structure and are not always looking for market rates of return but to facilitate infrastructure projects they will identify on their website (data will be public).

Importantly, the CIB is not looking to displace private investors but to co-invest alongside them and the federal and provincial governments. Obviously, priority will be given to projects that are aligned with governments' infrastructure priorities ('or else we won't get permits to build").

I wish they put that presentation up on their website or YouTube, he did a great job and admitted it's still early innings for this organization which is growing fast.

He also said CIB is open for business with large and small Canadian and global investors (the big deals aren't only going to go to Canada's large pensions but it's obvious they will be in on them).

Now, moving on to the ESG panel which started at 2:30:
How Investors will Benefit
Many institutional investors are learning that ESG is a core approach to investing — and the products which are out there are proving it. As more and more investors move into the field, discover the advantages of integrating in ESG into decision-making and hear about the approach of leading pension funds. Take away key insights on:

ESG, PRI, SDGs — demystifying the acronyms
Trends and best practices in ESG integration
The key ESG integration
ESG integration v. impact investing

Francois Boutin-Dufresne
Sustainable Market Strategies

Stephanie Lachance
Vice President, Responsible Investing

Martha Tredgett
Executive Director
LGT Capital Partners

Rosalie Vendette
ESG Practice Leader
Desjardins Group
I took a picture of the panelists which you see at the top of this comment. It was a very interesting panel and they covered a lot.

Stéphanie Lachance, Vice President Responsible Investing at PSP, emphasized that ESG integration isn't just about due diligence, the focus is shifting on actively monitoring these risks once the investment is made across public and private markets (click on image):

She said PSP is focusing on some 'ESG themes' like climate change (fully support the TCFD) and diversity where they're part of the 30% club and fully support it.

On impact investing, she gave the example of renewables which used to require enormous subsidies to be profitable and now they're part of every pension's portfolio.

Interestingly, during lunch, she told me that every large Canadian pension has integrated ESG in their investment framework even if they do not all advertise it. She also told me that perceptions are changing because ESG used to (wrongly) be considered a money-losing operation but now investors see the added value and how it can enhance risk-adjusted returns.

She also put up a nice slide on ESG vs Impact Investing (click on image):

Martha Tredgett, Executive Director at LGT Capital Partners, put up a similar slide but what I found fascinating is how LGT was early to the ESG approach and they considered these risks as part of a holistic risk framework long before many investors even knew what ESG is all about.

She also put up a slide on how LGT measures the environmental impact of their portfolio (click on image):

Rosalie Vendette, Practice Leader, ESG at Desjardins Group, also had many excellent insights on ESG integration and how impact investing isn't just about measuring financial results but outcomes.

She made a good point about what good are pensions if by the time people start collecting them, they cannot breathe fresh air and drink clean water.

She also put up a nice slide on fiduciary duty featuring comments from Al Gore (click on image):

Following this panel, I stuck around to listen to Richard Burnett, Chief Sustainability Officer at the Nobel Sustainability Fund:
An Innovative Way to Integrate ESG into Global Growth Private Equity Portfolios
Sustainable investing is one of the fastest-growing segments of the asset management industry. And, used well, it can deliver attractive returns relative to risk with low correlation to both traditional and alternative investments. In this fascinating presentation, hear how the Nobel Sustainability Fund, launched in 2017 with the support of H.S.H. Prince Albert of Monaco, has developed a proprietary impact assessment tool — the Earth Dividend — giving investors a unique scorecard to develop the highest possible return on their investments — and dispelling the myth that ESG focus comes at a cost to financial performance.

Richard Burrett
Chief Sustainability Officer
Nobel Sustainability Fund
The Nobel Sustainability Fund is a late-stage private equity fund which gives them more control over implementing an ESG approach.

Richard works with Earth Capital Partners and I met him and Gordon Power, the CIO, the prior day with Geoffrey Briant who represents them in Canada. Richard and Gordon are very impressive, they have tremendous experience in impact investing and they really know their stuff.

I'm not going to go over Richard's entire presentation but I like their holistic approach to understanding risks using their trademark scorecard (click on images):

He also emphasized that ESG investing leads to higher returns (click on image):

This is an important point because many pensions don't start off with an ESG approach, only focus on it after they identified an attractive investment but this argues the approach is all wrong or at least needs to incorporate more ESG factors from the getgo.

Richard and Gordon gave an example of a toilet company they invested in which uses significantly less water but they saw they could add value by using recycled plastic and this way, not only do they use less water and there are less aerosol contaminants, but they are produced using a more sustainable method.

These toilets are being used in Cape Town, South Africa and are now in China where they can be scaled massively.

Alright, I thank Geoffrey Briant for inviting me as a guest to this conference, it wasn't as dreadfully boring as I feared and I got a chance to meet interesting people, including Donna Jones, Senior Manager Client Relations at BCI (give Gordon Fyfe, Jim Pittman and Mihail Garchev my regards).

One last thing, CPPIB put out a sustainability report explaining where it will invest its green bonds proceeds and pushing for more board effectiveness:

For more information on CPPIB's approach to sustainable investing or to read the 2018 Report on Sustainable Investing, please click here.

And Deborah Ng, Head of Responsible Investing at OTPP, discusses the importance of protecting human capital with Top1000 Funds:

The article is available here and I encourage you to read it.

If there is anything I need to add here, feel free to email me at

Below, an interesting panel discussion on how to measure social impact investments featuring Case Foundation's Jean Case, Earth Capital Partners LLP's Marcelo de Andrade, Startupbootcamp's Tanja Kufner, and Bloomberg's Ed Robinson at Web Summit 2017.

Monday, October 15, 2018

Has the Market Topped Out?

Matthew J. Belvedere of CNBC reports, 'We've had the bulk of the gains we're going to get' in stocks, warns a disciple of Julian Robertson:
The stock market has basically topped out and won't deliver the eye-popping returns that investors have become accustomed to in recent years, hedge fund manager David Gerstenhaber told CNBC on Monday.

"I'm not predicting a bear market at this point. I want to be very clear about that," said the Argonaut Capital Management president. "[But] you probably don't get a peak of substance in the market until the end of the economic cycle is in sight."

Stocks traditionally tend to shoot up in the last legs of an economic cycle, Gerstenhaber said. While he did not predict when that cycle might end, he did say, "If things work out quite well, you probably get 3 to 5 percent over the market next year."

Gerstenhaber is one of Julian Robertson's first so-called Tiger Cubs, stars who managed money at Tiger Investment Management. As a trained economist, Gerstenhaber launched the macro investment group at Robertson's shop, which was responsible for some of the fund's biggest calls during the 1990s, such as betting on the collapse of the British pound and the sharp slide in crude prices following the onset of the Persian Gulf War.

About 10 days ago, Gerstenhaber said he thought the market looked vulnerable. He put on "put spreads" on the S&P 500 and the Nasdaq. He said he's evaluating when to cover those "put spreads," which are an options strategy for investors who are moderately bearish. "[The market] has gotten down to where I thought it was going to get in terms of the hard break."

In early trading on Monday, the S&P 500 has been down and up, continuing the volatility of last week, which ended with strong gains on Friday. But those gains were not nearly enough to make up for the rout on Wednesday and Thursday. The S&P 500 fell 4 percent for the week.

"Looking back a year, the Fed was radically mispriced, in my opinion. It seemed economic growth was pretty strong. The Fed had indicated that they wanted to tighten and the market really didn't believe it," Gerstenhaber said in a "Squawk Box" interview.

But that changed on Oct. 3. After the market closed that day, Federal Reserve Chairman Jerome Powell said monetary policy was a "long way" from neutral, touching off concerns the central bank would hike interest rates more aggressively than forecast. The stock market has essentially been under pressure ever since as higher rates make equities less valuable.

In 2018, the Fed increased rates in three 0.25 percentage point moves in March, June, and September to a range of 2 percent to 2.25 percent. Another hike is expected in December.

After their September meeting, central bankers were projected on a path to raise rates to 3.4 percent, before pausing.

In making his case for capped market gains, Gerstenhaber said he sees the Fed raising rates "multiple times next year" after hiking in December.

"They are doing that against the backdrop of slower economic growth and slowing profit growth," he continued. "The inflation rate is probably creeping up, in my opinion, given what we're likely to see on wages at this point. So the Fed will keep going."

Against that backdrop, Gerstenhaber said investors must be prepared for lower rates of return on financial assets. "It's an argument for more cash, unequivocally at this point."

The S&P 500 is coming off a 19.4 percent gain last year, on top of a 9.5 percent advance in 2016. The index was basically flat in 2015, after three straight years of double-digit gains.
I had a very long day so forgive me if I keep this comment short and to the point.

On Friday, I wrote about a jittery week on Wall Street and will let my readers reread that comment to understand what's at stake here.

If Gerstenhaber is right and the Fed moves "multiple times" next year after hiking in December, then the risk of a full-blown emerging markets crisis will rise considerably and that will heighten the risk of another deflationary wave headed our way.

This morning, he even admitted he wouldn't go long emerging markets after the selloff and reasonable relative valuations because of the Fed, the dollar and the rise in oil prices.

Basically, he confirmed my worst fear, namely, the biggest risk in markets now is a major Fed policy blunder, hiking way too much as the US economy gets set to slow.

Gerstenhaber also stated that big tech names have likely seen their best days and it's better to focus on defensive sectors like healthcare as the economy slows.

Below, David Gerstenhaber, Argonaut Capital Management president, joins 'Squawk Box' to discuss the markets after last week's selloff. Listen carefully to his comments, he's an excellent macro manager.

I'm a bit more bearish than he is on the economy and stocks and think a big bear market is coming sooner than we think, especially if the Fed keeps hiking rates which is why unlike Gundlach, I'd be loading up on US long bonds here (read this blog comment from PIMCO).

Tomorrow, I will attend an ESG conference here in Montreal, it should be very interesting. Hope to see a few of you there.