OMERS CEO Blake Hutcheson Tackles The One Question Head On
This is a great speech well worth listening to. Blake is a born speaker, very comfortable in front of the podium and also has a great sense of humour.
He began by acknowledging some of the giants that have spoken at the Empire Club of Canada, mentioning Winston Churchill and Margaret Thatcher, two of his favourites.
Blake also quoted Thatcher saying he can relate to this from time to time: "If I walked on water, my harshest critics would say it's because I cannot swim."
There is one truism about being a CEO anywhere, it's lonely at the top and sometimes you have to roll with the punches.
He broke his speech into four parts:
The one question head on, well you guessed it:
Blake said this on the push for more government intervention on where our pensions funds should invest:
"I can tell you some of the pro-interventionist comments have at least been well-intentioned but others have been full of naivety, misinformation, self-interested solutions, and in a few cases, all three."
For Blake the answer to this question is an "unqualified, unconditional, emphatic no!"
He explains how we live in the best country in the world even if it's far from perfect and everywhere he goes, people ask him about the success of the Maple Eight plans and he cites three reasons:
- We are delinked from our government
- We can buy platforms (like Oxford Properties which is a global success story)
- We have top models that allow us to compete globally
And he emphasized OMERS' money is the money of their hard-working members, not the money of the provincial or federal governments, and not their money.
As far as buying a quota of Canadian equities, he thinks it's ridiculous because they invest in Canadian equities and invest directly in some of the highest quality assets in the nation across infrastructure, real estate and private equity.
He specifically mentioned Bruce Power and Yorkdale shopping center stating: "Do people honestly think we should be pressured into selling those assets for lesser quality, lower return, higher volatility holdings for our members to placate the marrow, misleading views of the self-interested few?"
Blake freely admits they want to invest more in Canada as they "know the dollar, rule of law, have home court advantage and strong relationships but the answer isn't to prescribe a solution."
He said he and other Maple Eight CEOs are willing to work with Stephen Poloz tasked to bring together different views to see how Canada's large pension funds can invest more domestically and where they think they can play a leading role.
He ended that section by stating it's time to "roll up our sleeves and work together to come up with solutions".
Anyway, take the time to watch the entire speech below and keep in mind OMERS invests 25% of its portfolio in Canadian assets for the reasons Blake mentions above.
Also take the time to read the statement OMERS issued back in March on its commitment to Canada:
OMERS is an integral part of Canada’s retirement system, a role we have held with pride since 1962. We invest and administer ~$130 billion (as of December 31, 2023), on behalf of hard-working Ontarians and are dedicated to growing and fiercely defending their retirement savings. We must put members’ interests first and foremost; above those of any self-interested parties with competing agendas.
We can do this while being a huge champion for Canada – for our businesses, our economy, and our people. Roughly 25% of our portfolio ($34 billion) is invested here at home, notwithstanding the fact that Canada represents less than 3% of global GDP. A key advantage to the way OMERS invests is that we provide diversification that retail investors cannot achieve on their own. We give Canadians access to direct private investments in proven world-class platforms in asset classes such as: real estate (Oxford Properties); infrastructure; venture capital; growth equity; private equity and credit, and more.
OMERS is invested in many successful and iconic companies in our home province and country. This includes those harnessing cutting-edge technology, contributing to the fight against climate change, and providing key infrastructure. We are an investor in some of Canada’s most recognizable names in sports, entertainment, healthcare, clean energy, travel, hotels, office buildings, and shopping centres. In addition, approximately 20% of our global portfolio is invested in public equities, and we are a shareholder in many of Canada’s high-quality, publicly traded businesses.
We remain very interested in finding new and exciting investment opportunities in Canada that meet our required risk and return profile. We have communicated to both our provincial and federal governments our willingness to work with them to unlock both an environment, and specific opportunities, that encourage such investments. That cooperative approach is in the best interest of our plan and this nation.
A recent study clearly showed the impact of OMERS investments, operations, and our pension plan payments to our retirees. Annually, OMERS contributes $13.7 billion to Ontario’s GDP, and one in every 11 households in the province is positively impacted by our plan.
The capital we invest and manage is our members’ and theirs alone, and our obligation is to pay their pensions without fail. Any attempt to mandate investments in certain prescribed asset classes or components of our economy would limit our flexibility and make it extremely difficult to continue to deliver on our pension promise to the more than 600,000 Canadians that we serve.
I've said this before and I'll say it again, when it comes to my personal money, I only invest in US stocks and want US dollar exposure all the time.
It's served me well so far and sure, there are great Canadian businesses but I'm more comfortable betting on US innovation over the long run (Canada has become too socialist, too bureaucratic, too lethargic for my taste).
If I had to make a Canadian portfolio, sure I'd have some RBC, Manulife, Bell Canada, Enbridge, Canadian Natural Resources and other less well-known stocks that have performed well over time (Couche Tard, CGI, Dollarama, Stantec and WSP). I might add some Shopify for excitement and Barrick Gold to hedge geopolitical risks.
It's not a terrible stock market but the TSX is peanuts compared to the US stock market which has the biggest and best companies in the world and the added benefit of the US dollar which hedges against systemic risk because when it hits the fan, every investor in the world runs for the safety of US Treasuries.
Am I chasing Nvidia and other high-flying mega cap tech stocks? No but I probably should as its chart is still bullish even if parabolic:
Top hedge funds have a way to create bubbles and force other investors to chase these stocks into bubble territory.
I know it's a great company, data centers are hot, AI is here to stay, and so on and so on.
I just have a feeling when it crashes back down to earth after its meteoric rise, it won't be pretty.
And by the way, forget Nvidia, check out shares of Decker's Outdoor Cop (DECK) lately:
Another growth stock in a different industry (consumer cyclical/ footwear) which has taken off to the stratosphere.
The same with Chipotle Mexican Grill (CMG):
I can go on and on and on showing you a few parabolic US stock charts that will make the hair behind your neck stand up.
So far, the momentum, highly concentrated trades led by a few elite hedge funds are winning.
How long this will last is anyone's guess but it won't end well, that much I know.
I also know that pension funds shouldn't be chasing performance, it always ends badly which is why Andrew Coyne is out to lunch criticizing CPP Investments' active management.
Alright, please take the time to listen to Blake's speech at the Empire Club of Canada below, it's well worth it (starts at minute 10).
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