Public Pensions and the Pandemic

Earlier today, I watched a panel discussion moderated by Mark Wiseman on public pensions and the pandemic:

The effects of COVID-19 are being felt across every aspect of our economy and lives. What are the leaders of Canada's public pension funds doing to ensure that our retirement savings are safe in these unprecedented times?

Join Canadian Club Toronto on Thursday April 16th for a virtual discussion with our expert panel of pensions fund leaders featuring Blake Hutcheson (OMERS), Jane Rowe (Ontario Teachers' Pension Plan), and Kevin Uebelein (Alberta Investment Management Corp.), moderated by global investment manager and business executive, Mark Wiseman. The panel will dive deep into the challenges they are facing in our current environment, how they are pivoting to protect their portfolios, and the threats and opportunities that may emerge for Canadian public pension plans during this crisis.

This virtual event is free of charge. All you need to access the event is to register.

I embedded this discussion below and it's definitely worth watching and listening to the insights these pension executives provide.

It's pretty cool that Mark Wiseman and these panelists did this remotely and that the Canadian Club in Toronto provided it free of charge.

I found this an excellent discussion and paid particular attention to their comments on private markets as I am particularly interested in these markets given the difficulties airports, malls, and private companies are facing during this pandemic.

One thing I am increasingly worried about is what happens if this global economic shock lingers and the duration of this crisis is longer than what many are currently anticipating.

Private markets can absorb one or two bad quarters, not one or two bad years and this represents a real challenge for Canada's public pensions which are heavily invested in private assets.

However, Kevin Uebelein said something interesting, "there's more transparency in private markets" as they have a seat at the table and are able to discern exactly what is going on.

Blake Hutcheson is a real estate expert and he said industrial and multifamily are fine but hotels and retail are getting hit extremely hard.

I spoke with a real estate lawyer last night who told me he's seeing more deals lately and thinks the big developers are fine with a more balanced portfolio (government tenants, pharmacies, grocery stores, etc.).

This real estate lawyer was less bearish on retail than Canada's big pensions, telling me "you don't hold retail for revenues" but hold it for long term when the land can be developed into multifamily real estate. "The problem with Canada's large pensions is they need returns every year but if they took development risk, they'd realize they are sitting on a gold mine over the long run."

Jane Rowe offered excellent insights on contingency and liquidity planning but she admitted some portfolio companies will face real hardship (they recruited BCG and KPMG to help their portfolio companies navigate this crisis).

She did note, however, that Teachers' entered this year reducing risk but in hindsight, she wishes she sold more last year (they still sold $7 billion in PE).

This afternoon, OTPP announced that Jane Rowe will become Vice-Chair, Investments, effective October 1, 2020:

Ziad hindo, Chief Investment Officer of the Ontario Teachers' Pension Plan Board (Ontario Teachers') today announced that Jane Rowe, currently Executive Managing Director and head of the Equities department, will take on the new role of Vice-Chair, Investments, effective October 1, 2020.

Continuing to report to Mr. Hindo, Ms. Rowe will hold an advisory role with respect to Ontario Teachers’ investments. She will provide advice and counsel on the US portfolio including Cadillac Fairview investment activities, mentor senior employees, liaise with alumni and support the build of our alumni network, represent Ontario Teachers’ at external speaking engagements and on portfolio company boards, and continue to sponsor Pride and diversity and inclusion initiatives.

“Over the past decade, Jane has brought a distinctive and exceptional perspective to the table. She is an accomplished investor and team builder with the ability to inspire and develop our future leaders,” said Mr. Hindo. “The role she is taking on next will allow us to benefit in new ways from the special set of skills she has developed over her career.”

Ms. Rowe joined Ontario Teachers’ as head of private equity in 2010. Her mandate was subsequently expanded to include high-conviction equities, public or near-public company investments intended to generate superior financial returns. Under her leadership, net assets managed by the Equities team have grown from $11 billion to $47 billion, with an annualized rate of return before administrative costs of 18.5% as at December 31, 2019. The team’s portfolio includes more than 60 private companies, significant investments in public companies, and relationships with more than 30 private equity funds.

“I am proud of our team, the portfolio that we have built, and what we’ve accomplished together over the past decade for the plan and its members,” said Ms. Rowe. “I look forward to working with the investment leadership team, taking a broad perspective to help position our private asset portfolio and the investment teams for the future.”

Ms. Rowe will continue to sit on boards associated with Cadillac Fairview, Ontario Teachers’ wholly-owned real-estate subsidiary, and Camelot Group PLC, the operator of the UK National Lottery. A search is underway for a new head of Equities and an announcement will be made when this is finalized.

This sounds like a form of staged retirement as Teachers' has lost a few senior ladies over last few years (Nicole Musicco and more recently Barb Zvan) and they need Jane to stay on as she has deep experience and expertise which they need as she prepares to retire from that organization.

What else? This afternoon, CDPQ announced new appointments to maximize expertise and face global economic challenges:

Caisse de dépôt et placement du Québec (CDPQ) announced today some appointments and changes to its organizational structure to maximize the expertise of its teams to be well positioned to face global economic challenges.

“At the beginning of the year, it was clear that the challenges of the next decade would be very different from the last decade’s challenges. Since then, in only a few weeks, the world as we know it has transformed. It’s even more important to have increased agility in our decision-making processes and closer coordination in all aspects of strategy and managing our assets,” said Charles Emond, President and Chief Executive Officer of CDPQ. “With these appointments and changes to our structure, we can fully leverage the talent of our people. Regrouping our teams within strong business units will increase our efficiency and ability to seize more opportunities.”

First, Macky Tall is appointed Head of Real Assets and Private Equity, a new investment business unit that is home to key asset classes for CDPQ, created to increase the organization’s impact in those sectors. Through his various roles, Mr. Tall has built strong and lasting connections with CDPQ’s business partners. His track record includes achievements such as globally positioning our infrastructure activities and strengthening our operational expertise in Liquid Markets. In his new position, he will be responsible for the International Private Equity, Infrastructure and Financing Solutions teams, as well as for CPDQ Infra, where he remains President and Chief Executive Officer. Leadership of these teams remains unchanged. Mr. Tall is also appointed Chairman of the Board of Directors of Ivanhoé Cambridge, which will provide him with a broad perspective on our real assets activities, including real estate, where the portfolio’s repositioning is already well underway under the leadership of Nathalie Palladitcheff, President and Chief Executive Officer of the real estate subsidiary.

As a result of these changes, a search process to recruit a replacement for Mr. Tall as Head of Liquid Markets has been launched. Mr. Tall will fill the position in the interim with the support of the teams in place.

In addition, in Liquid Markets, Helen Beck is appointed Executive Vice-President and Head of Equity Markets. As the leader of this portfolio, Ms. Beck has overseen equity market activities in recent years, demonstrating solid expertise in portfolio management and the capacity to stay the course through various cycles. Ms. Beck will join the Executive Committee and report to the new Head of Liquid Markets.

Kim Thomassin, who was serving as Executive Vice-President, Legal Affairs and Secretariat, is appointed Executive Vice-President and Head of Québec Investments and Stewardship Investing. Ms. Thomassin possesses extensive knowledge of Québec’s businesses and a vast network, she is recognized for her command of the files she works on and for her negotiating skills. Her role includes responsibility for the Québec Private Equity teams as well as Espace CDPQ. In addition, Ms. Thomassin will continue to oversee the Stewardship Investing team, whose mandate is anchored to the heart of CDPQ’s mission.

Lastly, Chief Economist Martin Coiteux’s mandate is expanded. Mr. Coiteux, who is recognized for his deep understanding of the global economy and sharp analytical skills, takes responsibility for the Global Strategy team. His integrated team will develop the main pillars of the strategy in close collaboration with the Executive Committee and various CDPQ teams.

Macky Tall, the new Head of Liquid Markets, Kim Thomassin and Martin Coiteux will all report to the President and Chief Executive Officer. These appointments are effective immediately.

These are all great appointments, I congratulate Macky Tall, Kim Thomassin, Helen Beck and Martin Coiteux. I also applaud Charles Emond for making these new appointments so early in his tenure as new CEO, that shows true leadership.

I recently discussed how Michael Sabia was appointed the new chair of the Canada Infrastructure Bank and how I thought he would recruit Macky to head up this organization.

Well, I guess Macky is staying put at CDPQ and that is a good thing for that organization (they need his experience and leadership).

So, who will take over the Canada Infrastructure Bank? I mentioned Mark Wiseman and there's another infrastructure expert I definitely recommend, Andrew Claerhout, the former head of Infrastructure at OTPP who recently joined Searchlight Capital Partners. I think very highly of Andrew.

Also, there is someone else I'd highly recommend to Michael Sabia, someone Macky Tall hired at CDPQ Infra who is no longer there. You need a specific skill set to be the leader of the Canada Infrastructure Bank and someone who understands Ottawa very well and who can get things done properly and expeditiously.

Below, take the time to watch today's panel discussion on pensions and the pandemic, it's an hour long and well worth watching.

I really like what Blake Hutcheson said about his father being a serial entrepreneur and always optimistic. “If you don’t believe in tomorrow, you shouldn’t be in business.”