A Conversation With CAAT Pension Plan's New CIO

 Last week, CAAT Pension Plan appointed Asif Haque as its new Chief Investment Officer:

Asif joined CAAT in 2010 and holds the position of Managing Director of Public Markets, a role where he has led the team responsible for the Plan’s $11 billion public markets portfolio. Through a combination of effective external manager selection and strategic internal structuring decisions, Asif’s team has outperformed market benchmarks over the long-term.

Outside of work, Asif is proud to serve on the board of the Pension Investment Association of Canada (PIAC) and on the investment committees of the United Church of Canada Pension Plan and Nunavut Tunngavik, an organization supporting programs for Inuit in Nunavut.

Previous to CAAT, Asif held leadership roles at the Public Sector Pension Investment Board (PSP) and State Street Canada.

“We’re excited to have Asif take over leading our investment team at this critical juncture,” said Derek Dobson, CAAT Chief Executive Officer and Plan Manager. “Asif has the strategic vision, skills and experience we need to support the continued growth of the Plan, which is targeted to exceed $30 billion in assets by 2027.”

Asif will report directly to Derek Dobson and lead a growing team of investment professionals. Asif succeeds Julie Cays, Chief Investment Officer, who previously announced her plans to retire at the end of April 2021 and was named CIO of the year for 2020 by the Canadian Investment Review.

“I want to thank Julie for her countless contributions to CAAT and congratulate Asif on his new role,” continued Derek. “Julie has been an exemplary leader for CAAT, with influence far beyond Investments. We have full confidence Asif will be the same, helping advance our mission to expand defined benefit coverage to more workers across Canada.” 

Earlier today, I had a chance to catch up with Asif as well as Julie Cays, the outgoing CIO he will soon be replacing. 

Let me begin by thanking both of them for taking some time to talk to me as well as thanking John Cappelletti, the Senior Communications Advisor for setting this Microsoft Teams meeting up.

So, the purpose of this call was to catch up with Asif who I worked with at PSP years ago, to congratulate him on this important appointment and to also catch up with Julie who will soon be retiring. 

I told Asif he has big shoes to fill because Julie is a great CIO and I mean this in every sense, she's not only a great investment mind, she's also a really incredible person with great qualities that make her an outstanding leader.

Asif agreed and told me he has learned a lot from her over the last 11 years and plans on continuing on the same course she set, meaning leveraging off a great internal team and external partners across private and public markets to keep delivering solid results, making sure the plan remains fully funded.

It's important to note that Asif will oversee investment operations at a plan that is growing fast. John Cappelletti told me they manage roughly $15 billion now and in 2020, in the midst of a pandemic, they grew their membership by 7,500 new members. "As of the end of last year, we had over 70,000 members and 106 employers."

Today, CAAT announced that about 500 employees of St. John Ambulance are poised to join the CAAT Pension Plan through DBplus, effective April 1, 2021.

I fully expect more employers will join CAAT's award-winning DBplus and ironically, the pandemic has only fueled more demand for safe retirement solutions as employers recognize the need and that there is a cost effective way to provide a well governed DB plan to their employees.

I asked Asif what are the challenges he foresees and he replied: "The ones you cited in this conversation, namely, record low rates, more volatility so we really need to adopt the long view, manage our liquidity risk carefully to capitalize on opportunities as they arise and leverage off our external partners across public and private markets to capitalize on opportunities as they arise."

I specifically asked them about co-investments in private markets and here Julie interjected and said they're not quite at 50% co-investments like some of the larger pensions but are at "30% in Real Assets and a bit higher in private equity."

She also added: "We are now more selective with our co-investments and given that our managers operate in the mid market, we continue to find interesting deals to co-invest in." 

She agreed with me that private equity and real assets will be critical to obtain the required return and the co-investment approach is critical to reduce fee drag (Asif stated they are closer to their long term target weight of 35% in private markets; you can view their statement of investment policies and procedures here).

It's important to note that in private markets, Asif will continue to lean on Kevin Fahey who is responsible for the CAAT Plan’s private equity and real assets (infrastructure and real estate) investments.

Kevin is exceptional, I've heard nothing but good things about him and his experience and relationships in private markets are critical to the continued success of the team. 

The investment team will be growing. Asif told me they are 13 now and plan on hiring 8 new people this year. That might not sound like a lot but when you're a relatively small team, it is a lot.

But Asif has a lot of experience on-boarding and managing people (at PSP and CAAT) and even throughout the pandemic, their small investment team stays in touch regularly to talk shop but also to check in on each other and have some fun (you need to let loose or else it's too heavy and depressing).

He also spoke very highly about CAAT's investment finance team which is integral to their success.

As I stated, CAAT will be growing over the next decade, organically and growing new members, so its assets can easily triple over this period.

That growth has to be managed which is why you need a solid internal team and solid external partners.

I have no doubt Asif will be a great CIO, he has literally learned from the best there is (Julie is on another level) and he has a great team to lean on, especially Kevin Fahey who is as solid and good as they get.

His new boss, Derek Dobson, is scary smart but super nice and he's another highly experienced person Asif will be leaning on in good and bad times.

It's also important to note that CAAT recently announced it remained resilient through a tumultuous year:

The CAAT Pension Plan stands 119% funded on a going-concern basis, with a funding reserve of $3.3 billion, based on its latest actuarial valuation as at January 1, 2021.

Based on the Plan’s Funding Policy, the Plan governors determined that allocating additional reserves to further strengthen benefit security is the most prudent option at this time. Funding reserves maintain the Plan’s resilience and cushion the Plan against future economic or demographic shocks.

The valuation will be filed with the regulator by the end of March and posted to the Plan’s website. By opting to file this valuation this year, the Plan will not be required to file again before 2024.

Each funding valuation includes a review of the economic and demographic assumptions used to ensure they continue to be realistic and appropriate for the Plan’s risk tolerance. As part of this review, the Plan’s discount rate has been lowered to 4.95% from 5.15%. That means the Plan’s funded health improves when investment returns are greater than 4.95%.

The lower discount rate is consistent with the CAAT Plan’s focus on benefit security and sustainability, and reflects the asset mix and expected long-term market returns on the investment portfolio.

The CAAT Plan’s 2020 investment results will be released with its annual report on April 20, 2021.

“We entered the pandemic fortified with healthy funding reserves to protect the Plan against unexpected economic events. I’m pleased to report we ended 2020 stronger. The Plan’s funding reserves grew to $3.3 billion and our funding status improved to 119% — which means we have set aside $1.19 for every dollar of pension earned by our members.”
Derek W. Dobson, CEO and Plan Manager, CAAT Pension Plan

The focus at CAAT Pension remains squarely on managing assets and liabilities. The Plan made a wise and prudent decision to lower the discount rate (as other Canadian pension plans have done) to strengthen benefit security.

Markets are at an important inflection point, the so-called "easy money" driven by the liquidity tsunami has been made, there are going to be a lot tougher days ahead.

The good thing is Julie Cays has laid down the foundations for CAAT Pension Plan and Asif Haque will soon take over the reins. 

I'm confident he will do a great job and he has a great team to lean on. I wish them many more years of success and I honestly hope CAAT Pension grows its membership exponentially over the next ten years.

More DB pensions means more retirement security and that is good for the economy over the long run and good for the country as more people retire in dignity and security.

As far as Julie Cays, like HOOPP's former CEO Jim Keohane, she has mixed feelings about leaving a job she truly loves ("greatest job in the world"). 

I wish her a great retirement, hope she still stays active and hope to see her the next time she's in Montreal (great lady in every respect). 

Most of all, I hope she gets that face to face sendoff party she deserves once we put this bloody pandemic behind us, hopefully for good (crossing my fingers and toes).

Once again, I thank Julie, Asif and John for taking the time to chat with me earlier today and if there is anything that needs to be edited, I will do it as soon as possible.

By the way, John told me CAAT's 2020 results will be released on April 20th but knowing their asset mix and how diversified they are, I'm pretty confident they did well.

Below, a fantastic interview with Julie Cays, take the time to listen to her speak about her background, how she ended up as CIO of CAAT Pension Plan and how she changed and shaped their investment policies over the years and how they invest across public and private markets now. Watch it here if it doesn't load below.

Julie was integral to CAAT's success over the years and she recruited a great team to continue this success. She has laid great foundations for Asif Haque who will now be responsible for the next growth chapter of this increasingly important Canadian pension plan.