Wednesday, May 15, 2013

Ron Mock Named OTPP's Next Leader

Madhavi Acharya-Tom Yew of the Toronto Star reports, Teachers’ pension plan names successor:
Ron Mock will take over as president and chief executive officer of the Ontario Teachers’ Pension Plan when Jim Leech retires at the end of the year, OTPP said Tuesday.

Mock is currently senior vice-president of fixed income and alternative investments at the fund, which manages around $129.5 billion in assets.

He said in an interview that he looks forward to working closely with Leech through the transition period.

“[Jim] is a very successful leader and he’s had an unbelievable term here. He has led the organization on so many different fronts and I will have the luxury of being beside him for the next seven months while we transition through this,” Mock said.

“Our focus has been and will be on our pension plan members.”

Mock joined Teachers’, as the pension plan is known, in 2001 as director of alternative investments.

“Ron brings the ideal combination of experience, knowledge and leadership acumen to the CEO role at this high performance organization,” Eileen Mercier, chair of the pension plan said in a release.

“We have every confidence that he will lead the organization to new levels of success as CEO, as Jim has and Claude Lamoureux did before him.”

Leech is retiring Dec. 31 after more than 12 years at Teachers, the last six as CEO. A selection committee of the board has been in preparation for succession since 2011, the pension plan said.

“I could not be more pleased with the board’s decision to appoint Ron,” said Mr. Leech.

“Ron has a reputation for collaboration and team building, balancing current needs with a view to future possibilities. Plan members, sponsors, our employees and our investment partners all will benefit from his leadership of Teachers’.

Leech joined Teachers’ in 2001 and became chief executive officer in 2007. He is credited with steering OTPP, the largest single-profession pension plan in Canada, through the Great Recession and record-low interest rates.

OTPP, which administers the pension of 303,000 active and retired teachers in Ontario, saw a 26 per cent jump in retirements in 2012.

It posted a return of 13 per cent in 2012. Though the fund has a shortfall of $5.1 billion, it was 97 per cent funded as of the end of January.
Janet McFarland of the Globe and Mail also reports, Ron Mock ascends to the top of Ontario Teachers' Pension Plan:
Ron Mock has completed his rise from the ashes of collapsed hedge fund firm Phoenix Research and Trading Corp., putting a controversial failure behind him to become the new chief executive officer of the Ontario Teachers’ Pension Plan.

Mr. Mock, 60, was named Tuesday as the successor to Teachers CEO Jim Leech, who is retiring at the end of the year. Mr. Mock is currently Teachers’ senior vice-president of fixed income and hedge funds, heading the largest of the pension plan’s six major asset management groups.

The appointment makes Mr. Mock just the third CEO to lead the $130-billion fund since its creation in 1990 to manage pension assets for 303,000 current and retired Ontario teachers. The fund was initially headed by Claude Lamoureux, who was succeeded in 2007 by Mr. Leech.

“I am very excited, because it’s not every day that someone gets to lead an organization like this,” Mr. Mock said in an interview. “Teachers is a leader in this field, and to be the one chosen to lead it, I’m thrilled.”

Before joining Teachers in 2001, Mr. Mock was CEO and co-founder of Phoenix Research and Trading, a hedge fund management company that collapsed in 2000 with losses of over $125-million (U.S.).

The failure came after Mr. Mock discovered bond trader Stephen Duthie had secretly taken a massive and unapproved $3.3-billion position in U.S. benchmark Treasuries in 1999.

Mr. Mock notified the Ontario Securities Commission about the discovery and reached a settlement agreement with the regulator in 2003, accepting a six-year prohibition from acting as a director or officer of a public company, and a reprimand after acknowledging he did not do enough to supervise Mr. Duthie’s trading. The OSC settlement said Mr. Mock’s supervision was “wholly inadequate” and the trading scheme could have been detected with scrutiny.

Mr. Duthie, meanwhile, received a 20-year ban from trading securities or acting as a director or officer of a company after an OSC hearing panel ruled he mispriced and hid a huge volume of unauthorized trading. The panel ruled his conduct was “duplicitous.”

Mr. Leech said in an interview the Teachers board considered Mr. Mock’s role at Phoenix, but felt he had broken no laws and had been a highly respected leader in his 12 years at Teachers.

“Anybody who has been in the securities business for 25-plus years is going to have some scars – Lord knows, I’ve got mine,” Mr. Leech said. “The name of the game is to make sure you learn, and he learned that the buck stops at the top.”

One of the victims of the firm’s collapse was Teachers itself, which lost $10-million on investments, Mr. Lamoureux said.

Mr. Lamoureux, who was Teachers’ CEO at the time, said he was initially astonished when another Teachers executive suggested the pension plan hire Mr. Mock in its hedge fund division.

But after conducting an investigation, Mr. Lamoureux said he became convinced the failure was the fault of the bond trader and Mr. Mock was not to blame.

“I think he had a rough time for a couple of years after he was hired because the OSC was all over him, when in fact he went to them of his own free will – and many people don’t do that,” Mr. Lamoureux said. “But we kept him, and I knew that the board of Teachers was very pleased with him when I was there. He did a great job on fixed income when he took that over.”

Mr. Lamoureux said fixed income had not been generating high enough returns when Mr. Mock joined Teachers, and he helped turn around its performance.

Mr. Mock is one of five senior vice-presidents at Teachers who run different portions of the fund’s investment portfolio.

“He did a fabulous job. I’ve been at many meetings with him with these hedge funds and you can see that Ron knew more than a lot of people who came to visit us and were trying to sell their stuff.”

Mr. Mock said Tuesday he is ready to oversee a far broader portfolio of assets. But with Mr. Leech still in the top job for another seven months, Mr. Mock said it is too soon to talk about his vision for Teachers or any changes he would foresee.
In her article, Katia Dimitrieva of Bloomberg reports, Ron Mock Succeeds Jim Leech as CEO of Ontario Teachers:
Ron Mock, senior vice president of fixed income and alternative investments at Ontario Teachers’ Pension Plan, will succeed Jim Leech as chief executive officer and president next year.

Mock, 60, takes over Jan. 1 when Leech retires after 12 years with the plan and six years as CEO, the Toronto-based fund said today in a statement.

“I want to stay focused on ensuring we are the leader” in the pension plan industry, Mock said in a phone interview. “The world’s a changing place so you have to navigate the organization along the way. I’m comfortable with the team that’s here that we’ll be able to do it.” He declined to comment on his strategies or plans for Ontario Teachers.

Mock joined Teachers’ in 2001 as director of alternative investments and in 2008 was promoted to senior vice president, overseeing all fixed-income assets and hedge funds. He’s also a board member of Cadillac Fairview, which manages Teachers’ C$21 billion ($21 billion) commercial and retail real estate portfolio.

Mock was previously CEO of Phoenix Research and Trading Corp. and was responsible for all of Phoenix Canada’s fixed income business, including the Phoenix Fixed Income Arbitrage LP, a hedge fund. The hedge fund collapsed in 2000 when it lost $125 million in the U.S. bond market, according to an Ontario Securities Commission settlement document from 2003.
Probe Costs

The OSC ordered Mock to pay C$45,000 for investigation costs and banned him from being an officer or director for six years. The regulator said Mock failed to adequately supervise Stephen Duthie, a former Phoenix employee whose trading of U.S. government bonds was “directional, unhedged, and contravened” the company’s investment parameters. Mock’s failure to supervise Duthie was “material to the collapse” of the company, the OSC said.

“We were 100 percent aware of the OSC case and we are fully confident in his abilities and integrity,” Deborah Allan, spokeswoman for the pension fund said in an e-mailed statement. “What the OSC found was an oversight issue, however many years ago. We’re going into this with eyes wide open.”

Leech, 65, was chief executive of the pension fund during the financial crisis, raising net assets to C$130 billion. The fund manages money for 303,000 retired and active teachers in Canada’s most-populous province.

A committee made up of board members has been preparing for the succession since 2011.
Ontario Teachers' put out this press release announcing that Ron Mock will be succeeding Jim Leech on January 1st, 2014.

You will read a lot of news articles on Ontario Teachers' soon to be new chief but let me share with you why I believe Ron Mock is an incredible individual and why he will be an outstanding leader, continuing the organization's tradition of excellence, ensuring their place among the best pension plans in the world.

I first met Ron back in 2002 when I was working as a portfolio analyst for Mario Therrien at the Caisse covering directional hedge funds and a few fund of funds. That first meeting left a lasting impression on me. In fact, I was so blown away that kept thinking how I wish I worked for him.

I remember taking a lot of notes in that meeting. I was a junior asking an industry veteran a lot of questions. I was fascinated by hedge funds and didn't want to squander the opportunity to learn as much as possible from one of the world's best hedge fund investors.

Ron started the meeting by stating: "Beta is cheap but true alpha is worth paying for." What he meant was you can swap into any index for a few basis points and use the money for overlay alpha strategies (portable alpha strategies). His job back then was to find the very best hedge fund managers who can consistently deliver T-bills + 500 basis points in any market environment. "If we can consistently add 50 basis points of added value to overall results every year, we're doing our job."

He explained to me how he constructed the portfolio to generate the highest possible portfolio Sharpe ratio. Back then, his focus was mainly on market neutral funds and multi-strategy funds but they also invested in all sorts of other strategies that most pension funds were too scared to invest in (strategies that fall between private equity and public markets; that changed after the 2008 crisis). He wanted to find managers that consistently add alpha - not leveraged beta - using strategies that are unique and hard to replicate in-house.

At one point I asked him why is he was invested in over 130 hedge funds. That is when he brought up his experience at Phoenix Research and Trading Corp., the fixed income arbitrage fund he co-founded, and how a rogue trader led to its downfall. Ron took the fall for that blow-up, accepted full responsibility, and it cost him a lot on a personal and professional level. He learned a lot from that experience which is a big reason why he was able to put it behind him and excel in his roles at Ontario Teachers.

His experience at Phoenix also taught him the importance of covering operational risk. He was obsessed with operational risk and told me one reason for investing with so many funds was to diversify operational risk and mitigate blow-up risk. Till this day, the alternatives team at Teachers' along with the finance department conduct one of the most comprehensive due diligence on operational risk management (they even perform due diligence on administrators). They also make sure alignment of interests are there and not paying huge fees to large asset gatherers who fail to perform or deliver leveraged beta.

Ever since that first meeting, we kept in touch. I remember another meeting at the Caisse afterward where he spoke in front of Henri-Paul Rousseau, Gordon Fyfe and other senior managers. He wooed them all with his expert knowledge. 

When I moved over to PSP Investments in 2003, I remember meeting him again with Gordon Fyfe, PSP's president, CEO and CIO, at Teachers' offices.  He repeated a lot of the same stuff and took his time to explain to us their investment approach and process. Gordon and I came away from that meeting very impressed. "Nice guy and he really knows his stuff," Gordon told me after that meeting.

Ron Mock definitely knows his stuff, more than most of the hedge fund superstars I've invested with in the past. He has extensive experience and a global network of contacts most pension fund managers and fund of hedge fund managers can only dream of. He's also one of the nicest guys I've ever met in this industry. He has been through hell and back but this is what makes him an incredible individual and an outstanding leader.

In my last conversation with him last week, we went through hedge fund strategies and alignment of interests. He told me that the "sweet spot" they find lies with funds managing between $500M and $2B. "Those funds are generally performance hungry and they are not focusing on marketing like some of the larger funds which have become large asset gatherers." He told me the hedge fund landscape is changing and he's dismayed at the amount of money indiscriminately flowing into the sector. "Lots of pension funds are in for a rude awakening."

On behalf of all those who know him well, I congratulate Ron Mock for this appointment. There is no doubt in mind he will continue the tradition of excellence that this organization is well known for. He has an outstanding team to back him up and I'm sure they feel the same way I do about him on a professional and personal level. Ontario Teachers' members are extremely lucky to have Ron Mock as their next leader.

Also want to congratulate Mario Therrien, my former boss at the Caisse, for being nominated Senior VP, External Portfolio Management in Public Markets. I hooked up with Mario for a coffee recently and told him that he offered me one of the best jobs in my life because I got to meet all sorts of interesting hedge fund managers. If it wasn't for that job, would have never met Ron Mock. I think highly of Mario too on a personal and professional level and know he will do a great job in his new role as a senior VP.

Below,  Guggenheim Investment Advisors CIO Charles Stucke discusses hedge fund strategies with Deirdre Bolton on Bloomberg Television's "Money Moves." Wish it was Ron Mock being interviewed telling us where he thinks money is to be made in hedge funds and other strategies. I guarantee you he's busy working hard on his four-year strategic plan, always worried about the risks that lie ahead.