Meet OPTrust's New CEO

Yaelle Gang of the Canadian Investment Review recently wrote a nice article on OPTrust’s new president and CEO Peter Lindley:
It’s been one month since Peter Lindley, the OPSEU Pension Trust’s new president and chief executive officer, started the role.

With an engineering degree and a more than 30-year career in finance under his belt, Lindley’s most recent role was president and head of investments at State Street Global Advisors. “When I went to work at State Street I got to work with investors, mostly pension plans, and providing them with investment advice was something I found a lot of personal satisfaction in,” he says.

The work led Lindley to eventually move to the asset-owner side of the industry. “I felt the next step in my career would be to join an asset owner and, as luck would have it, at the right time this opportunity came up and I was just really excited about it.”

One of the reasons he was attracted to the OPTrust was its leadership in the responsible investment space, he says, noting this topic is very dear to his heart. “I’ve seen [it go] from something in the wilderness to being very mainstream today. So I was really pleased to see responsible investing being so important here as well.”

Lindley says he was also attracted to the plan because of its size and the fact it serves 95,000 members, yet it’s still small enough to be nimble and has a culture of innovation.

Speaking of priorities going forward, Lindley wants to maintain the stability and momentum at the OPTrust. “But there are a lot of challenges out there, whether it’s short-term volatility in the markets or longer-term challenges from the investment point of view.”

Among these challenges, Lindley cites the lack of clarity around policy, political issues and trade wars. “I think there’s a lot of short-term volatility. But our investment approach really, I think, can manage the short-term volatility.”

For a longer-term organization like the OPTrust, the longer-term return expectations and low long-term interest rates are the main challenges, he says, noting this means the present value of liabilities is higher and it’s more difficult to hit return targets. “You’re very much more reliant on other markets, so it’s important to be well-diversified.”

That said, the OPTrust is well-funded, he adds. And there can be opportunity in volatility, too.

As a leader, Lindley describes his values as respect, integrity and teamwork. “I don’t believe in the star system really, I think the team can be better than the sum of the parts.”

The best piece of advice he’s ever received, he adds, is that companies should be as loyal to their employees as they expect their employees be to them. “We are in a resource business and our No. 1 resource is our people.”
Peter Lindley was appointed President & CEO of OPTrust back in September. I briefly discussed the context back then when I covered three big moves at OPTrust, OTPP and PSP:
[...]  after a few months of waiting for the process to work its way through, Peter Lindley has been named president and CEO of OPTrust.

Mr. Lindley replaces Hugh O'Reilly who stepped down back in March under pressure. I don't want to speculate as to why Hugh resigned but I was told by a very senior pension fund manager that OPTrust has a history of replacing its CEOs and the problem all stems from the governance of the Private Markets Group which apparently doesn't report to the president and CEO but to OPTrust's Board directly (a strange legacy issue which if true, needs to be rectified ASAP).

All I know is before Peter Lindley, Hugh O'Reilly lasted the longest in that position as his predecessors, Bill Hatanaka and Stephen J. Griggs lasted three years and less than a year in that role respectively.

In fact, Griggs sued OPTrust for wrongful dismissal, alleging he was terminated after trying to rein in “lavish spending” at the fund’s autonomous and high-flying private equity investment group.”

“The former CEO of the Ontario government’s employee pension fund has filed a wrongful dismissal lawsuit, alleging he was terminated after trying to rein in “lavish spending” at the fund’s autonomous and high-flying private equity investment group”:

“Mr. Griggs’ lawsuit alleges he was fired after members of the fund’s private markets division lobbied for his dismissal because they were angered by his attempts to review their operations and curtail the division’s “lavish spending”. He alleges he was trying to bring the private markets team under more centralized control because it was operating with little oversight.”

“The lawsuit says the fund’s private management group or PMG had little oversight and could make any size investment without board approval. It has separate computer and data systems, and “in effect operated as an autonomous entity”.
Anyway, that's all in the past and has nothing to do with the current PMG or Peter Lindley who I'm sure was aware of these issues before signing with OPTrust (and in all likelihood, signed an iron clad contract with a great golden parachute in case he's dismissed prematurely or without cause).

Coming from State Street Global Advisors, Lindley has tremendous investment experience heading up investments there but I'm glad he's also a strong advocate for defined benefit plans and will continue the work Hugh O'Reilly did advocating for DB plans (a very important part of the job).

The biggest difference between State Street and OPTrust is that Mr. Lindley will be interacting more with his clients, OPTrust members, and there will be a direct purpose to the work he'll be doing making sure OPTrust maintains its fully funded status.

In regards to this funded status, it's worth noting that unlike Ontario Teachers', HOOPP and CAAT Pension Plan, OPTrust and OMERS still offer guaranteed indexation which is something I don't recommend (conditional inflation protection is fairer risk sharing across active and retired members and offers the former plans a lever to get back to fully funded status if they experience a deficit again).

At OPTrust, Peter Lindley is surrounded by a solid team which includes James Davis, its CIO. James isn't only knowledgeable on investments in general, he's particularly honed in on responsible investing and takes climate change risks very seriously. For example, go read my comment on OPTrust's climate-savvy project.
I later found out that OPSEU's president, Warren ('Smokey') Thomas may have had something to do with Stephen Griggs's dismissal and if true, this is a huge governance lapse (Smokey shouldn't have any say whatsoever on these matters, period).

Anyway, I have not had a chance to talk to Peter Lindley, I figured it's best to let him settle in to this new role before I have a good discussion with him.

[Note: See update at the end as I did get to speak to Peter the day after posting this comment].

I did however see him on BNN Bloomberg this week (see below) and was impressed with his knowledge of the Canadian pension landscape, the challenges that lie ahead and the importance of responsible investing at OPTrust and more broadly.

Typically when a new CEO comes to a pension, they have their agenda, start firing and hiring people and reorganizing the place (often to the detriment of the pension but sometimes these changes are needed).

Mr. Lindley is an engineer by training, he strikes me as the analytical type who doesn't make hasty decisions he will later regret. He is probably still evaluating all the moving parts at OPTrust to see where he wants to focus his attention and prioritize the key challenges and address them with a clear long-term strategy.

If you listen to him speak, he understands that we are in a low-rate, low-return world and it will be increasingly challenging for OPTrust and other pensions to meet their return target and maintain their fully funded status (at least in Canada where most pensions are fully funded or close to it).

Diversification is the key across public and private markets and I'm sure Mr. Lindley is keenly aware of this. James Davis, OPTrust's CIO, is doing a great job covering public markets but as far as private markets, there is no designated head at OPTrust (correction: see update below, James Davis is responsible for both public and private markets).

Yes, Sandra Bosela and Gavin Ingram are the co-heads of the Private Markets Group at OPTrust and are both doing a great job (Sandra takes care of private equity and Gavin is responsible for infrastructure), but there is no head of the Private Markets Group which is part of OPTrust's executive team.

I mention this because I learned that Nicole Musicco, Senior Managing Director of Private Markets at IMCO, just tendered her resignation at IMCO (this is her last week) and I can't think of a better candidate to head up the Private Markets Group at OPTrust or elsewhere.

Why did Ms. Musicco tender her resignation? I can't speculate but my sources tell me the place isn't being run properly, there's too much micromanagement from the top (CEO level), frustration set in and reached a boiling point.

IMCO's board of directors needs to meet and discuss some very tough issues because when a Nicole Musicco tenders her resignation in late October prior to receiving any bonus, that's really not good and it tells the world something is really not right there. IMCO is losing an extremely qualified female professional in charge of Private Markets and Brian Gibson, Bob Bertram and the rest of the board of directors need to understand why this happened and make some tough decisions.

All I can tell you is if I was sitting on IMCO's board, I'd be extremely concerned about this departure, not Doug Ford's gravy train. I'd be asking a lot of very tough questions.

Anyway, things will be sorted out at IMCO one way or another and I hope this organization finds its footing again because I want to see it thrive and succeed over the long run.

As far as Peter Lindley and OPTrust, he has a few more months to enjoy the honeymoon and if markets don't blow up, he should take the time to reflect and plan out his long-term vision and strategy.

Lastly, following my last comment on the Alberta government hijacking the ATRF, I did have some discussions with people who openly wondered if Doug Ford will follow suit and amalgamate OTPP, OMERS, HOOPP, IMCO, OPTrust and CAAT Pension.

One person told me "no way" because these are mature pensions which have "reached the requisite scale" (at least first four) to do global deals" and "at one point, too many assets under management becomes a hindrance."

I didn't agree on that last point and stated CPPIB at $400 billion+ in assets is the best-performing pension fund in the country and is run extremely well, proving it can be done. But I also stated; "I doubt it will happen because there will be enormous public outcry and pushback from various unions if Doug Ford tried to pull a Jason Kenney in Ontario" (Ford isn't stupid, he wants to be re-elected).

Below, Peter Lindley, CEO of OPTrust, joins BNN Bloomberg's Catherine Murray for a look at the Canadian pension landscape and how he's facing the major shifts that pension funds are experiencing and the headwinds ahead. Good interview, click here if it doesn't load below.

Update: The day after posting this comment, I had a chance to speak to Peter Lindley. I want to thank him for taking the time to speak with me and thank Claire Prashaw and Jason White for setting this call up.

Peter came across exactly as he does in the interview below, very nice, thoughtful and smart. He began by sharing some good news as he is expecting another grandchild any day now and I want to congratulate him and his family.

He told me he is 54 years old, was born in in the UK, studied engineering there and started working in finance in London in the mid to late 80s at the Industrial Bank of Japan. He moved to Canada in 1992 working at CIBC Wood Gundy, then Deutsche Bank (1997) before landing at State Street Global Advisors in 2004 where he worked with clients on strategic and tactical asset allocation (he was based in Montreal).

He reiterated the key challenges that OPTrust and all other pensions face:
  • Low rates
  • Long-term projections for expected returns are low
  • Increase in market volatility
  • Heightened geopolitical risks exacerbating market volatility
He told me that despite being one of the few DB pensions in Canada with guaranteed indexation (not conditional inflation protection), OPTrust has been fully funded for over ten years and holds one of the lowest discount rates in Canada (3.15% real, 5.15% nominal, second lowest only to OTPP).

He said they are first and foremost focused on maintaining their funded status and mitigating against downside risks. They measure short-term, medium-term and long-term liquidity risk very carefully, always ensuring they minimize the risk to members.

He corrected me on a governance point. He told me that the Private Markets Group (PMG) reports to the CIO, James Davis, and that James reports to him. He stated this is a "high-performing team" that can capitalize on opportunities in private equity, real estate and infrastructure that are too small for the bigger pensions in Canada.

He said he has only been at OPTrust for six weeks but his priorities are to enhance the Member Experience Team which is doing a great job handling the needs of OPTrust's 95,000 members. He said that OPTrust placed in third in the CEM Benchmarking survey and he doesn't want to rest on their laurels.

The other big priority is responsible investing, something he is very committed to. He told me one of his mentors at State Street was Chris McKnett who did a wonderful Ted Talk on the investment logic for sustainability (see below). Another big influence on him was Michael Jantzi, CEO of Sustainalytics, a global leader in ESG and Corporate Governance research and ratings.

Lindley said climate change is a long-term challenge and all institutional investors need to take notice and understand the risks and opportunities it presents. Interestingly, he said that traditional energy makes up a mere 3% of OPTrust's portfolio and renewable makes up 8% but he was careful to say he's against divesting and refers to have a seat at the table to influence companies. He also said some traditional energy companies recognize the threat of climate change and are responding to be part of the solution.

On LinkedIn, he made reference to this Globe and Mail article written by Dustyn Lanz is Chief Executive Officer of the Responsible Investment Association on (how and why) to align your investments with a low carbon future.

Another big priority is advocating for defined benefit plans. He said he's a big advocate of defined benefit plans and is committed to expanding OPTrust Select to provide DB pensions for employees at Ontario's charities and broader public sector. He said there are 24-25 new employees that joined OPTrust Select and another 50 are in the pipeline.

Importantly, he noted that 85% of these employees are women that "are typically not well represented in  terms of sustainable retirement solutions" (he's right, pension poverty discriminates in terms of gender and most women succumb to it for a lot of reasons).

Lastly, he said even though he comes from the sell side, he prefers the buy side and being an asset owner and is committed to sustainability and DB pensions.

Once again, I thank Peter Lindley for taking the time to talk to me, I really enjoyed our conversation and congratulate him again as he and his family await another member to their family.

Again, take the time to watch the BNN Bloomberg interview below. I also embedded a clip where Chris McKnett makes the case for sustainable investing to large institutional investors. It really is a great Ted Talk, well worth watching it.