UPP's CEO Is Setting the Right Tone and Vision From the Get-Go

Gideon Scanlon, editor of the Canadian Investment Review, reports on how UPP is building on jointly governed pension model with a pandemic launch:

When the University Pension Plan officially launched in July 2021, it did so with Barbara Zvan as its inaugural president and chief executive officer.

Fresh from a 25-year career with the Ontario Teachers’ Pension Plan, she was appointed by the UPP’s board of trustees in July 2020. While most of the foundational work had been done by the time she joined, it would be up to Zvan and a team of full-time employees and contractors to carry the project over the finish line.

“It’s been an interesting experience. Most of the people haven’t met one another in person. We don’t have an office yet. We needed to find people with expertise who knew what to get done, people who are flexible and excited about being part of a startup.”

It’s not difficult to see why Zvan was seen as the ideal candidate. At the Ontario Teachers’, she rose from an assistant portfolio manager to chief risk and strategy officer. She also has a track record of working well in uncharted territory — something she credits to experiences gained early in her career.

“When I started, the CEO of the Ontario Teachers’ was Claude Lamoureax. He had a novel approach to running a pension plan — he treated it like a business. He was also a great leader, who, alongside the plan’s inaugural chief investment officer, Bob Bertram, made it a pretty special place to work. I felt very supported. They were open-minded, innovative and welcomed good ideas. It was a great way to start a career.”

Around the time Lamoureaux and Bertram left the Ontario Teachers’, the 2008/09 financial crisis was sending shockwaves through the financial sector. Since Zvan had recently been promoted to senior vice-president of asset mix and risk, she found herself on the frontlines of the economic downturn.

“Post-[financial crisis], it was all about bringing more institutional strength to the risk function and I spent many years doing that. I ended up looking at best practices at other financial institutions and bringing over what was relevant to a pension plan.”

After the financial crisis, Zvan started to rethink asset allocation and risk management by encouraging the integration of responsible investing, including environmental, social and governance policies, into the plan’s decision-making.

All of these lessons would be valuable in setting up a brand new pension fund from the ground level. The UPP was founded as a defined benefit plan tasked with managing the pension needs of Ontario universities — with three initially signed up to join. Unlike most of Canada’s other public plans, it’s jointly governed by employers and employees, with both groups having a say on critical issues and in the election of trustees.

Upon her appointment last summer, Zvan was facing a ticking clock. The UPP had agreed to take control of the assets of the Queen’s University and Guelph University pension plans on July 1, 2021, with the University of Toronto assets to be handed over just nine months later. In total, it was set to become responsible for about $10.5 billion in assets.

With no intention of waiting for an end to social distancing, it fell to the UPP team to figure out how to pull off the launch. “Having a small team with lots of experience is helpful,” says Zvan. “You can get pretty innovative on Zoom, especially when you let other people bring the ideas to the table.”

One idea generated via virtual meetings was to open the organization up to its future stakeholders. “We are leveraging the fact that many of our members are part of the faculty of universities and are experts in their field. If you want people engaged in your pension, you have to open the way to conversation.”

In the spring of 2021, the UPP team reached out to future plan members, hosted virtual listening sessions and a town hall discussion on members’ hopes for their pension funds. It’s also planning to conduct an online survey of members’ hopes for their pension funds. What emerged from these intelligence-gathering exercises was a clear picture of what members wanted from the UPP.

“First and foremost, they want retirement security. They want us to invest responsibly. They want us to think about the impact it will make on the people around the world. They want to have an opportunity to provide input along the way. They want transparency and the ability to feel informed.”

The knowledge that the UPP’s future members were supportive of the idea of socially responsible investing bolstered Zvan’s resolve to bring some of her considerable ESG investment experience to the new pension fund. Beyond her work at the Ontario Teachers’, she also served on Canada’s expert panel on sustainable finance, is a board member of the Responsible Investment Association and is on the advisory board of the Institute for Sustainable Finance.

On July 1, just a few weeks after Trent University announced its pension would be absorbed by the UPP in 2022, the team held a socially distanced celebration. “Day one went well — and we’re thrilled about that,” says Zvan. “Now, we’re turning to longer-term planning and getting to know the portfolio. There’s still a lot of build to do.”

Great article with lots of food for thought.

You can tell Barb Zvan really enjoyed being part of OTPP during the growth phase when Claude Lamoureux was CEO and Bob Bertram was CIO.

Like Claude, Barb is an actuary and just like him, she's a really good actuary who understands the nuances of asset liability management.

But Lamoureux and Bertram were also pioneers in the sense that they were doing things differently, expanding the asset mix to include real estate, infrastructure, private equity and hedge funds.

Now it's commonplace, everyone does it, but back then it was revolutionary for a large Canadian pension to run its operations like a Blackstone.

Anyway, the last time I spoke with Barb Zvan was in mid July when I caught up with her to go over the latest developments at UPP.

Since then, a few interesting newsworthy items. Last week, UPP appointed an inaugural CIO and Senior Managing Director Private Markets:

Today marks another celebratory milestone for UPP, with the arrival of the Plan’s inaugural Chief Investment Officer (CIO), Aaron Bennett, and Senior Managing Director of Private Markets, Peter Martin Larsen.

Our investment approach is a cornerstone of our pension promise and core to our identity. The knowledge and expertise of these two leaders will be instrumental in establishing an innovative, risk-optimized investment strategy grounded on the Plan’s mission of retirement security and responsible investing.

“Today, UPP welcomes two seasoned, versatile investment leaders with global vision, deep expertise and a core commitment to sustainable investing. We could not ask for better ambassadors to help shape and lead UPP’s investment vision,” said Barbara Zvan, President & CEO.

As incoming CIO and a member of UPP’s Executive Leadership Team, Aaron will lead all aspects of UPP’s global investment strategy and risk management and operations.

Reporting to the CIO, Peter Martin Larsen joins as UPP’s Senior Managing Director, Private Markets, responsible for developing UPP’s private market strategy and building internal knowledge of global private marketplaces and emerging industries.

I congratulate both Aaron and Peter for being named to these critical positions at UPP.

I personally think it's brilliant that they named the CIO and Senior Managing Director, Private Markets at the same time, showing how committed the organization is to start getting to work immediately on allocating assets across public and private markets.

Interestingly, last week when I interviewed Mike Wissell, HOOPP's new CIO, Jim Leech, OTPP's former CEO, sent me an email telling me both Mike and Aaron are OTPP alumni.

I knew about Mike, didn't know Aaron was also there but I look forward to talking to both Aaron and Peter once they settle in their new roles and Barb was gracious enough to let me know that they will arrange a conversation.

Getting back to the article above, there's something else that struck me, Barb's immense respect for UPP's members.

Don’t get me wrong, she always had respect for her plan members. At OTPP, she knew very well that Ontario's teachers are highly educated and they were relying on her and other senior managers to make sure the plan remains solvent and is run in their best interests.

But now her plan members are even more educated and she's taking engagement a step further by actively engaging these highly educated members to be more active, more informed on UPP's activities, and voice their concerns or help them manage the plan better.

When you're managing the pensions of university professors, you have some great minds across many fields. It's not just the finance and economics experts, you have AI experts, geologists who understand climate change and sustainable investing, you have political science professors who understand geopolitical risks and last but not least, you have philosophers and intellectuals in arts who can help you see the world from many angles (people always ask me who's the smartest person I ever met in my life and I tell them: "That's easy, Charles Taylor, the greatest intellectual tour de force Canada has ever produced.”).

Importantly, UPP's members are highly educated and sophisticated and Barb Zvan is setting the tone and vision right from the get-go by engaging them and asking them to be part of the journey.

That shows a lot of respect and that shows you how much Barb Zvan values the plan's members.

It would have been easier (but foolish) to leave them out of the process by claiming governance and that they shouldn't meddle but Barb understands the value UPP's members bring to the table and she wants the organization to leverage off this immense talent pool across all academic fields.

Maybe I'm reading it wrong but that's the way I see it.

Barb is a hell of smart person and she respects UPP's members and wants to learn from them, she wants the organization to actively engage with them and become better in the process.

Lastly, Sarah Rundell of Top1000funds.com recently featured Barb in a conversation with Innes McKeand, head of strategic equities at the United Kingdom’s USS Investment Management, going over the challenge of scenario analysis:

Scenario analysis shows that the ability of pension funds to pay their pensions will be severely impacted by climate. But a discussion between asset owners at Sustainability in Practice revealed the challenges in the process.

Although the United Kingdom’s USS Investment Management, the wholly owned investment management arm of the £67.6 billion Universities Superannuation Scheme, has conducted a scenario analysis to explore how assets behaved over time in response to climate change, Innes McKeand, head of strategic equities at the fund said scenario models can “only take you so far.”

Speaking at Sustainability in Practice he said scenario analysis offers a guide but is not precise given the tipping points and instability inherent in climate change, the economy and the market reactions to climate events. He told on-line attendees comprising some 250 asset owners with a collective $13 trillion AUM from 33 different countries that the last scenario analysis conducted by the fund suggested US equities suffered particularly, but that the impacts are difficult to assess.

“We need the next stage of evolution of models until we start moving the portfolio around.”

McKeand, who is responsible for all of USS’s listed equities portfolios across developed and emerging markets and is a member of the asset allocation committee added that sustainability has been embedded into the fund’s structure, beliefs and culture for some time and that responsible investment is now part of the fund’s fiduciary duty.

Scenario analysis at USS has been both top down and bottom up. Top down analysis has explored the impact of a warming world on asset values on a disorderly and orderly basis. McKeand noted limited impact on asset values in an orderly transition but much more of an impact in a disorderly transition.

“We see a visible impact here but it is all back-ended” he said.

Looking through a bottom-up lens, he noted how every asset the pension fund owns will ultimately have to be net zero. He said that knowing an investee company’s carbon footprint will allow the fund to use carbon pricing scenarios but said challenging data issues remain.

He also noted that the analysis has looked at the impact on assets, but now needs to look at assets and liabilities, and the climate impact on the fund’s covenant – university employers across the UK.

Governance and net zero

McKeand noted the importance of governance when it comes to scenario analysis and the fund’s net zero ambitions.

“How do you manage this thing? Net zero is an enormous topic,” he said.

He said USS was in the thick of trying to settle on a governance structure to steer the fund to net zero.

“It involves establishing how to set meaningful targets and holding ourselves to account.”

He noted the vital role of asset managers in progress and said that portfolio managers and analysts play a vital role in integrating net zero into valuations and the investment process.

He also noted the importance of governance in aligning incentives the right way so that managers and staff are aligned in the challenge. Nevertheless, he said that boards and trustees focused on their fiduciary duty “can’t do everything” and what is right for some asset owners won’t be for others.

“It is a rubbery concept as what is right for some, isn’t for others.”

While USS is far down the road other funds are only beginning the journey. Embedding governance around ESG is a central tenet at Canada’s newly created $11 billion University Pension Plan (UPP) said Barbara Zvan, chief executive of at the first fund of its kind in Ontario’s university sector.

“We have taken a lot of time to lay out governance, building an exciting plan that universities and members want to join and part of that is the ESG and climate lens,” she said.

The fund has already developed a responsible investment policy and due diligence guidance for investment managers.

Zvan noted how incorporating physical and transition risk given the breadth and depth of many pension funds assets is challenging.

“Capturing tipping points is difficult,” she said. She said it made collaborations and sharing research important.

For example, the fund has reached out to peer plans and used Mercer research, while analysis by the Bank of Canada, as well as regulators and Canadian insurance groups and banks, has helped develop climate scenarios. She said a priority was to ensure that ESG was embedded throughout the organisation with skills and oversight and not siloed. She said priorities include a governance budget and investment sophistication, either internally or externally.

“We won’t necessarily train in house,” she said.

Both panellists reflected on how their broad membership and diverse spectrum of opinions acted as a spur to progress.

“It is an advantage,” said Zvan “We are trying to figure out how to engage members. Asking what they think is important is a real opportunity.”

This is a great conversation which you can watch here. Barb talks openly about engaging with UPP's members.

Interestingly, I wrote about the Universities Superannuation Scheme's (USS) recently in a blog comment looking at whether there is big trouble at the UK universities' superannuation scheme.

Below, an older interview in ICPM's Global Pension Powerhouses series with Barb Zvan, the Inaugural President and Chief Executive Officer of the University Pension Plan Ontario (UPP) and former Chief Risk and Strategy Officer for the Ontario Teachers' Pension Plan.