On AIMCo's Independence, OMERS' New CEO

Kevin Uebelein, the chief executive officer of the Alberta Investment Management Corporation (AIMCo), wrote an op-ed in the Edmonton Journal on why investment independence is essential to AIMCo's mandate:
I feel that it is very important to personally address the questions and accusations that have been raised in the media — both the traditional and social varieties — around the roles and relationships that exist between the Alberta Investment Management Corporation, AIMCo, and the provincial government. Specifically, there has been a lot written and said recently about the Alberta government’s influence or control over AIMCo’s investing decisions.

As AIMCo’s CEO, let me be absolutely clear on this issue: the Alberta government has no say whatsoever regarding where or how we invest. AIMCo’s operational and investment independence from government is such an important consideration of our business that it was explicitly written into our founding legislation, The Alberta Investment Management Corporation Act. Maintaining investment independence is essential to our ability to fulfill our mandate, which is to maximize investment returns by acting in the best interest of, and solely for the benefit of, all our clients.

As it stands today, AIMCo is responsible for the investment management of a strong majority of Alberta’s public-sector pension plans. We also manage the assets of the Heritage Savings Trust Fund and many provincial government accounts. Our team at AIMCo takes tremendous pride in this responsibility — a responsibility that should and does put our clients’ investment needs as the one and only objective.

Accusations that AIMCo does not exercise absolute investment independence are wrong. To suggest that recent moves by the Alberta government to broaden and solidify AIMCo’s scope of clients is motivated by a desire by government to control those investments is also wrong. I speak on behalf of all AIMCo’s leadership and board in saying that we would never allow our investment independence to be put in jeopardy.

I can also testify that at no time have I had anyone from this government attempt to challenge our investment independence, either directly or indirectly.

Rather than a bid for influence, the Alberta government has introduced the recent changes to AIMCo because they understand that in the very competitive world of institutional investing, scale and long-term stability are extremely important advantages: advantages than can and ought to be brought to bear here in Alberta.

However, this is hardly a unique or Alberta-only observation. Elsewhere in Canada and around the world there are active moves to build larger, more sophisticated institutional pools of capital, with the end objective of being able to invest more successfully and by more efficient means for the collective end-stakeholders. This is exactly what AIMCo is dedicated to doing for Albertans.

I believe that AIMCo is an institution that all Albertans should take pride in, and so it worries and disappoints me when untrue and undermining accusations about us are made and spread.

Over our 11-year history, AIMCo has grown to be a successful, world-class investment organization. It’s been built right here in Western Canada, away from the traditional institutional investment hubs, but without sacrificing one iota of investment savvy, sophistication or global scope and reach. I am grateful for the vote of confidence that the Alberta government has made in AIMCo. We will make every effort to deliver on our expanding responsibility to Alberta, but never at the cost of diminishing our absolute operational and investment independence.
I read Kevin Uebelein's op-ed yesterday and thought it was extremely well written.

Kevin is trying to address these gross misconceptions in Alberta that AIMCo is and extension of the government of Alberta.

It isn't, just like the Canada Pension Plan Investment Board (CPPIB) isn't an extension of the federal government or Ontario Teachers' Pension Plan (OTPP) isn't an extension of the government of Ontario or the Caisse de dépôt et placement du Québec (CDPQ) isn't an extension of the government of Quebec.

These public pensions operate like businesses investing in public and private markets across the world. They have independent boards and hire highly qualified staff which they compensate appropriately to deliver on their mission.

Edmonton might not be the epicenter of pensions (like Toronto and Montreal) but it has its fair share of pension talent no thanks to AIMCo and the ATRF.

I can tell you AIMCo's leadership team is full of highly qualified people who really know their stuff. Dale MacMaster, AIMCo's CIO, is easily one of the smartest and nicest CIOs I've spoken with and even though I have not met or spoken to them, I hear great things about other leaders at AIMCo like Sandra Lau, EVP, Fixed Income and Peter Pontikes, EVP, Public Equities.

In short, Albertans are lucky they have AIMCo and anyone who says otherwise is completely out to lunch or has their own agenda to advance.

I contacted Kevin Uebelein earlier today to discuss this article and shared some comments I read on LinkedIn:
I read two comments on LinkedIn:
1) ironically that's also what the ARTF fund believed too. Will AIMCo support the ARTFs independence by refusing to manage their, until recently, independantly managed funds?

2) the majority UCP government have already demonstrated that they are willing, in fact eager, to tear up any and all existing provincial legislation if it interferes with their political agenda.
And this: "The fact he wrote this article indicates something must be percolating within the government..."
Kevin was busy going in and out of meetings but he did share this: "The comments and reactions that you shared with me help underscore the (unfortunate) need for us to speak up about the historic and ongoing investment independence that AIMCo has, without Government influence. I’m quite sure that one Op Ed piece won’t change the minds of everyone who believe these conspiracy theories, but silence on my part regarding the rumors and misinformation was clearly not an option."

I completely agree with him and I'm glad he's addressing these conspiracy theories head on. It's a real shame most Albertans have no clue about AIMCo and how critical it is that it maintains its total independence from the provincial government.

In fact, this morning when I was being interviewed by Ed Harrison on Real Vision (it will eventually be made public but subscribers can view it here), I flat out stated Canada has the best large defined-benefit plans in the world for three reasons:
  1. We got the discount rate right. Our large DB pensions use much lower discount rates that the assumed investment returns that US public pensions use to discount their future liabilities (anywhere between 7% to 8%).
  2. We got the governance right. In Canada, our large public pensions operate totally independently from government. This means, independent qualified board members are sought to oversee these large pensions and they hire a CEO who hires senior managers to run the day-to-day affairs of these pensions. They are compensated appropriately and run these pensions much like large businesses, investing across public and private markets all over the world.
  3. We got the risk sharing right. In Canada, large and some smaller public pensions (like CAAT) are jointly governed and the risk of the plan is shared equally among all stakeholders, including retired members. Typically, this means adopting conditional inflation protection where indexation is partially or fully lifted if a pension is experiencing a deficit and restored retroactively once it reaches fully funded status again.
Anyway, I enjoyed talking to Ed Harrison, an hour of conversation just blew by but I think we covered the main points.

In other major pension news today, OMERS announced their CEO, Michael Latimer, will retire on May 31, 2020 and Blake Hutcheson will assume the role of CEO on June 1, 2020.
OMERS is pleased to announce the appointment of Blake Hutcheson as its new CEO effective June 1, 2020. Mr. Hutcheson is currently President and Chief Pension Officer, and will succeed Michael Latimer, who is retiring after two decades with OMERS, the last six years as CEO, on May 31, 2020. The transition will commence in early January, consistent with OMERS succession plan, and will remain seamless over the period.

“Michael has done an outstanding job as OMERS CEO,” said George Cooke, Chair of the OMERS Administration Corporation Board of Directors. “He led OMERS in the development and successful execution of our 2020 strategy, which provided clear direction for our members, sponsors, stakeholders and employees and saw significant growth in assets with steady improvements in the Plan’s liabilities and financial position. At the same time, he focused on building a strong culture and establishing a workplace where employees are fully engaged.

“The Board is very confident in Blake’s leadership given his track record in building strong relationships, successful global organizations, showing great investment judgement and understanding all aspects of OMERS and its vast stakeholder group,” continued Mr. Cooke. “His proven motivational style and distinguished career is exemplary, as is his commitment to the future of OMERS.”

“It has been a privilege and an honour to lead the talented group of people at OMERS,” said Michael Latimer. “When I first took the role of CEO, I established three priorities for our organization: to focus on our people, our results and our culture so that we ensure the OMERS plan would be secure, sustainable and meaningful to our 500,000 members. I believe with the quality of our people and the balance sheet we have built, OMERS is well-positioned to weather the challenges and seize the opportunities that lie ahead.”

Under Mr. Latimer’s leadership as CEO, OMERS assets have grown from $65 billion to well over $100 billion, growth of more than 50%. OMERS achieved a solid annual net return of 8% over this period, well above the Plan’s discount rate, improving the Plan’s financial position to near full funding. Over the same period, the organization successfully deployed $33 billion of capital as a result of its asset mix shift into private investment asset classes while expanding its global footprint and opening offices in Singapore, Sydney, Paris, Berlin, Boston and San Francisco.

“The Board has made an excellent choice in appointing Blake and I am confident that under his leadership the organization and our members are in good hands,” said Mr. Latimer. “Blake is committed to OMERS members, employers, unions, stakeholders and employees and to the execution of our mission and vision. He is a leader who will make a difference for OMERS and I am excited for him and for the team. I know that Blake will lead the organization to a new level of success.”

Mr. Hutcheson assumes his new role, having been with OMERS for ten years. The first eight and a half years he served as the CEO of Oxford Properties (an OMERS company) where he grew this business from being primarily a domestic operation to becoming a $50 billion, truly global leader in the real estate industry that returned an average of 12.5% during his tenure. Since April 2018, he has been the President and Chief Pension Officer at OMERS and has helped transform the Pension Services area within the organization, while carrying out responsibility for Strategy, Operations, Communications, Government Relations, Legal, and Data & Technology. Early this year, under his team’s leadership, OMERS approved a 2025 and 2030 Strategy, which will provide clear direction for the next five- and ten-year period. Blake has been a highly successful CEO for over 20 years and has served on more than 25 Boards and Committees of both public and private entities. He is a graduate of the University of Western Ontario, London School of Economics and Columbia University.

“It is an honour to be asked to take on this leadership role at this important time in the history of OMERS,” said Mr. Hutcheson. “I accept it with equanimity and tremendous enthusiasm. The leadership team we have at OMERS is terrific and I look forward to working with them. I have worked extremely closely with Michael for the last ten years, hold him in the highest regard, and believe that together we will model the CEO transition in a way that will make OMERS proud.”

Mr. Latimer concluded, “As the outgoing CEO, I would like to thank each and every employee of OMERS, past and present, for their contributions to our significant growth over these years. I would also like to thank our Board of Directors for their support. Without both, achieving our goals would not have been possible. Across geographies, offices and businesses, We are All OMERS, and proud of it. Everything we do at OMERS is in service to our members. They are our motivation and inspiration, and the reason we show up for work each and every day and do our best on their behalf”.
I don't cover OMERS as much as I should on this blog -- mainly because they fly too low under the radar -- but let me be clear on one thing, Michael Latimer has done an outstanding job leading this organization over the last six years and Blake Hutcheson, President and Chief Pension Officer, is absolutely the best person to succeed him and take OMERS to another level.

I want to publicly congratulate both individuals and wish Mr. Latimer a nice, well deserved retirement and Blake Hutcheson much success leading this organization once he takes over the helm.

One thing I noticed on LinkedIn a couple of weeks ago, is Blake Hutcheson slept on the streets of Toronto to support Covenant House Toronto and the work they do to serve youth who are homeless, trafficked or at risk:

When people ask me what is the most important quality of a real leader, I immediately say "empathy." And here I am referring to genuine empathy, not superficial, generic empathy.

It's not easy sleeping on any streets, Mr. Hutcheson and most of you (including me) are fortunate enough to have a roof over our heads when we go to bed. A lot of youth in Canada aren't so fortunate so please help support the Covenant House Toronto here.

Another reason why I like empathy as a quality, I am a big believer in workplace diversity and truly believe in order for an organization to become diverse, its leaders need to walk in the shoes of others, including disadvantaged groups like people with disabilities (don't just talk the walk, walk the walk when it comes to diversity).

Below, Kevin Uebelein, CEO of AIMCo, joins BNN Bloomberg to discuss their billion-dollar purchase of Northern Courier pipeline from TC Energy (this deal was announced in late May; see details here).

Also, Blake Hutcheson, OMERS President and Chief Pension Officer and incoming CEO, took part in a panel discussion on stewarding long-term assets at the Milken Conference which also featured Neil Cunningham, President and CEO of PSP Investments and Alain Carrier, Senior Managing Director, International at CPPIB. Great discussion, take the time to watch it.

Another great discussion I enjoyed was a Bloomberg panel on the evolving nature between institutional investors and PE featuring Beringea Chief Investment Officer, Karen McCormick; OMERS Senior Managing Director and Head of Europe, Jonathan Mussellwhite; and BC Partners Partner, Member of the Executive Committee, Nikos Stathopoulos.