Friday, September 5, 2008

Who Is Richard Guay? A Brief Profile of the Caisse's Next Leader

Late last night, La Presse published an article that Richard Guay, the interim head of the Caisse de Dépôt et Placement du Québec, will succeed Henri-Paul Rousseau as the new President & CEO of this organization.

I quote the following from the article:

Cette nomination devait être confirmée mercredi prochain, mais une conférence de presse aura lieu aujourd'hui à 11h30, après une réunion spéciale des membres du gouvernement.

Avec ce choix, le gouvernement Charest crée un précédent : depuis longtemps les grosses pointures retenues pour diriger gérer les milliards des caisses de retraite avaient toujours eu des liens avec le monde politique.

For those of you who do not understand French, it says that the nomination will be confirmed next Wednesday, after a special meeting of members of government, but a conference call will be held today at 11:30 to announce the appointment.

Moreover, with this nomination, the Quebec government is taking the unprecedented step of appointing someone with no political links to run the multi-billion dollar pension fund.

(Thank God for that insight - when it comes to pension investments, the last thing the Caisse needs as a leader right now is some political hack who doesn't know his ass from his elbow!)

Now, most of you do not know Richard Guay, so I thought I would give you a brief profile. Mr. Guay is an exceptionally intelligent individual. He holds a PhD in Economics and Finance from Queens University and he is a Chartered Financial Analyst (CFA). From 1989 to 1994, he taught finance at HEC Montréal, the business school of the University of Montreal.

Mr. Guay joined the Caisse back in 1995 and in November 2002, he was appointed Executive Vice-President, Risk Management and Depositors’ Accounts Management.

In March 2006, he was promoted to Chief Investment Officer, supervising the four executive vice presidents of investments that are responsible for 14 of the Caisse’s 18 specialized portfolios. He also manages asset allocation, leverage use and index selection for these four investment groups as well as for the Real Estate and Private Equity investment groups, in addition to establishing their value-added objectives.

Furthermore, Mr. Guay oversees the following teams: Investment Policy Research and Advice, Tactical Asset Allocation and Project Administration and Management. He is also a member of the Executive Committee.

On a personal note, I have worked with Richard Guay and I know he is more than capable to assume the large responsibility of taking the Caisse to the next level. Mr. Guay is a highly ethical individual who is very sharp and a tireless worker. He also does not give away any free lunches: he will reward alpha and not "disguised beta" from internal and external managers in all asset classes.

I have already written about how the Caisse uses the most appropriate real estate benchmarks of all the large Canadian pension funds. This is largely due to Mr. Guay's insight. In my opinion, they still need to bolster the Private Equity benchmark, but they are leagues ahead of most large public pension funds in terms of their benchmarks. Again, this is due to Mr. Guay.

Critics of this nomination will probably ask themselves why nominate someone from within after the ABCP losses that plagued the Caisse last year. No doubt, Mr. Guay has a huge job to clean up the ABCP mess, but he has already cleaned up a lot of that mess and will continue to do so for the remainder of 2008.

Importantly, Mr. Guay understands the challenging times ahead for the Caisse and his focus on risk management will be absolutely crucial to the Caisse's investment process and navigating through the difficult period that lies ahead.

So to all his critics I say give Mr. Guay a chance to prove himself. There is no doubt in my mind that he is the right person to lead this organization at this critical juncture.

I congratulate Richard Guay on this important nomination. (Hopefully he will let me buy him lunch some time in the near future!).

On that note, I wish all of you a great weekend and please read my upcoming comment on how this time it could get worse than the Great Depression.

***Update (06-09-08): For those of you who speak French, you can watch an interview with Richard Guay with Les Affaires by clicking here.

Basically, Mr. Guay is under no illusion that the next five years will be a lot tougher than the last five years, stating that he expects returns to be a lot lower given current long bond yields. He also told the reporter that the extreme stock market volatility will affect returns this year ("the S&P/TSX lost 7% in a week, what we expect it to return in a year").

Finally, on ABCP, Mr. Guay does not see this market existing if the Supreme Court approves the restructuring plan because the debt will be rolled over to long term bonds. He also stated that the Caisse undertook measures to make sure that such investments do not occur again. Let's hope they learned their lesson.


See my second thoughts on Mr. Guay in a comment comparing apples to oranges.

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