OTPP Veteran Joins IMCO?

The Investment Management Corporation of Ontario put out a press release, IMCO Appoints Industry Veteran, Nicole Musicco as Private Markets Head:
The Investment Management Corporation of Ontario (IMCO) announced today that Nicole Musicco has been appointed Senior Managing Director, Private Markets, effective January 7, 2019.

Ms. Musicco is a former executive at Ontario Teachers’ Pension Plan where she held various senior roles. As Vice President of Teachers’ Private Capital, she oversaw externally-managed private equity and venture capital fund positions, as well as emerging market co-investment and underwriting activities. She also led expansion into investing in new sectors. In addition, as Managing Director for Asia-Pacific, she was instrumental in establishing the fund’s office in Hong Kong, leading all investment activities in the region. Most recently, Ms. Musicco was Senior Managing Director of Ontario Teachers’ Public Equities group.

“Nicole’s appointment is an important step in moving our private markets’ strategy forward,” said Jean Michel, Chief Investment Officer. “Her deep investing background and experience in structuring complex transactions will be invaluable as we establish essential strategic partnerships and continue to source investment opportunities that will enable us to meet our clients’ investing goals.”

Ms. Musicco will report to Jean Michel and she will be based in IMCO’s Toronto office.

Ms. Musicco graduated from the HBA and MBA programs at the Richard Ivey School of Business, and from the Bachelor of Science Kinesiology program at Western University. She is on the board of Youth Employment Services (YES) and is a member of the investment committee for the UHN Toronto General &Western Hospital Foundation.

About IMCO

The Investment Management Corporation of Ontario (IMCO) manages $61.6 billion of assets on behalf of its clients. IMCO's mandate is to provide broader public-sector institutions with investment management services, including portfolio construction advice, better access to a diverse range of asset classes and sophisticated risk management capabilities. IMCO is an independent organization, operating at arm's length from government and guided by a highly experienced and professional Board of Directors. For more information, visit www.imcoinvest.com and follow us on Twitter @IMCOinvest.
First, let me begin by congratulating Nicole Musicco for being appointed to this important role at IMCO. It's a fantastic opportunity for her and IMCO is lucky to have her on board heading up private markets.

Second, I wasn't surprised about this when I found out this morning as there were rumors circulating last week after Ms. Musicco resigned from Ontario Teachers' Pension Plan where she was the Senior Managing Director of the Public Equities group.

Last Monday, Teachers' shuttered that group, let go of some senior investment officers and absorbed others (like Relationship Investing) into the Private Capital group headed by Jane Rowe. It was unclear what role Nicole was offered but it now doesn't matter, she has a much bigger job ahead of her at IMCO.

A lot of rumors circulating around the moves last Monday at Teachers'. I was told the Global Public Equities group struggled for years to post decent returns and it didn't surprise me that Teachers' followed its peers to index a lot of this activity and use external managers where warranted.

Interestingly, I was told Relationship Investing struggled the most but nobody was let go there.

To be fair, I have not spoken to Ron Mock or Ziad Hindo, the new CIO, so I didn't get the full story as to why there were big changes at this group. All I can state is from the outside, it looks like it was performance related and a difficult decision was made to let go of some highly qualified and well respected senior investment officers and absorb others.

You should note that similar things have happened at almost all of Canada's large pensions where a decision was made to index part or all of public markets.

As I stated on Friday when I went over top funds' Q3 activity, these are brutal markets for active stock pickers, just brutal.

The only irony is that value investing is typically what the folks at OTPP and other pensions focus on, and it is now coming back in vogue as tech stocks are getting clobbered in the second half of the year.

From that perspective, I'm not sure about the timing of this decision but again, I don't have the details and I suspect timing wasn't an issue.

There is something else, something a former senior investment officer from OTPP shared with me:
I wonder if this [decision to index] is short-sighted. Personally I think that thoughtful fundamental analysis has a role to play. Indexing and quant may be mathematically optimal in some ways but if everyone does it then you have an unstable system. It is also unsatisfying from a governance perspective as you don't care about what they underlying business does, you don't care if management is good or bad, you don't care if they act ethically, all you care is that they are in the index or that your model likes them.

As "The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism," put it - the function of capital markets is to efficiently allocate capital - it is hard to do that when capital markets are entirely composed of indexers.

Active investing, and especially value investing, have struggled for the last eight years or so but I think it still makes sense over the long run.
There is a lot of truth is what he writes but it's been a very, very long and tough slug for value managers over the last eight years as tech stocks led the market up. Boards get fed up of continual underperformance, senior managers start looking for scapegoats and unfortunately, heads roll when "something needs to be changed".

Will this decision to index prove to be short-sighted? In the short run, I think so as I expect a long bear market is headed our way and it arguably has already begun. Longer term, however, nobody knows, it might prove to be a very wise decision.

In any case, this comment isn't about criticizing Ontario Teachers' latest moves in Public Equities. I do note however that Teachers' has lost some very senior investment managers over the last few years including Bjarne Graven Larsen, Michael Wissell (now at HOOPP), Andrew Claerhout, Wayne Kozun, and now Nicole Musicco. And there were a few others who left the organization recently.

It's very hard replacing such qualified individuals, not impossible but extremely hard, and when you lose people with experience, you lose something critically important, especially heading into a bear market.

As far as Nicole Musicco, I never met her but Ron Mock spoke very highly of her to me and I can't imagine he's pleased to see her leave the organization. I believe Teachers' had big plans for Nicole but as I told someone last week: "if she got the offer from Jean Michel to go work at IMCO to head up Private Markets, she'd be downright crazy not to take it."

I was surprised because I thought she was a Public Markets person but she has extensive experience across private and public markets and she will build a great team at IMCO, there is no doubt about that. She is well plugged into Toronto's pension talent pool, the brokers and more importantly, she knows all the key players to build long-term strategic relationships in private markets investing and co-investing with top funds all over the world.

In short, IMCO's gain is Teachers' loss here but it's a free and very competitive market in the Canadian pension industry, people are free to discuss potential opportunities at the large pensions as they come up and decide to move if they feel it's a great opportunity.

I end once again by congratulating Nicole Musicco for being appointed as the Head of Private Markets at IMCO. Her experience at OTPP will prove invaluable at IMCO, the large Ontario pension fund which isn't flying under the radar any longer.

She also gets to work for Jean Michel, a very sharp and nice CIO with extensive investment experience. I suspect Jean will soon announce who the Head of Public Equity and Credit and the Head of Total Portfolio and Capital Markets will be and away IMCO goes, off to the races.

The timing couldn't be more critical. Long gone are the easy "buy the tech dips" markets. Now, you need to earn your alpha across public and private markets.

I wish Nicole and everyone else at IMCO a lot of success, it won't be easy but it will be fun and very interesting and stimulating.

Below, an older CNBC clip (2015) where Nicole Musicco, then Head of APAC at the Ontario Teachers' Pension Plan, discussed the fund's portfolio diversification.

I also embedded a panel discussion from the 2018 Milken Global Conference which Nicole took part in a discussion on the impact of technology in portfolios.

Listen to her speak, she obviously knows her stuff and now has a senior investment role at Canada's fastest growing pension behemoth where she will put her experience and vast knowledge to good use.