Canada's "Overpaid" Pension Fund Managers: 2024 Edition
Even though he is the Prime Minister, Justin Trudeau is far from being the highest paid in the federal apparatus. The prize goes to a civil servant who earns 17 times her salary, reveals a compilation from our Bureau of Investigation.
It is Deborah K. Orida, CEO of PSP Investments, the manager of Canadian government employee pension fund who pockets the biggest income, she earned $7.1 million in 2023-2024 after taking into account a hiring bonus of $2 million.
Ms. Orida earns nearly $2.5 million more than the CEO of the Caisse de dépôt et placement du Québec (CDPQ), Charles Emond, who was, for his part, the highest paid executive in the Quebec state.
Senior executives at PSP and executives at CPP Investment, which manages the Canada pension plan, are by far the highest paid employees of federal Crown corporations.
No less than 10 of them earn more than $2 million per year.
No surprise“Those who are in the lead are the ones we expected. All financial executives who manage large pension funds are there. It’s the same thing in Quebec with the CDPQ,” says Geneviève Tellier, professor of public administration at the University of Ottawa.
The CEO of the institute on the governance of private and public organizations, François Dauphin, is not surprised either.
According to him, “the remuneration is lower if we compare ourselves to the big banks, but it remains really high compared to the rest of the Crown corporations”.
The PM below $500,000
For comparison, Mr. Trudeau’s salary amounts to $406,200. He is the sixth highest paid country leader in the world. To arrive at these findings, our Bureau of Investigation compiled the salaries of civil servants contained in federal government decrees and company annual reports.
The data has been added to our interactive tool which shows civil service salaries.
François Dauphin also believes that it is normal for finance executives to be better paid, because these organizations try to compete with the private sector.
In competition with the private sector
“You can easily become a private millionaire with other forms of remuneration, such as stock-based remuneration. This is what public plans must compete with,” he emphasizes.
PSP says it bases the compensation of Deborah K. Orida and the rest of its executives on what is done within fund managers in other provinces, such as the CDPQ, pension plans, investment managers, banks and companies insurance.
Alright, let me begin by stating this isn't a particularly good article but it was published in Le Journal de Montréal so a lot of people here in Quebec read it wondering who is Deb Orida and why are we paying a civil servant $7M a year?
First of all, pension fund managers at Canada's large pension funds aren't civil servants, something that this reporter neglects to mention.
They're fund managers, finance professionals that typically come from the private sector and the executive managers wake up at the crack of dawn and pull in 14 to 16 hour days.
"So what Leo, you wake at the crack of dawn, look at markets all day and then write this god forsaken blog everyone expects to read for free, nobody is writing you multi-million cheques."
True but I answer to myself, my wife and kid, not to a board of directors and I've worked at these large pension funds so I can tell you from personal experience who I think is way overpaid and who is way underpaid.
And it's not always who you think.
For example, while the attention goes to senior execs, there are a lot of senior directors, managing directors and senior managing directors who are pulling in $1M+ compensation and I openly question if they are all worth their keep.
Yes, senior execs make a lot of money and it irritates me to no end when people say "they can easily make more in the private sector."
This is total rubbish, once they lose their coveted job, they will never make more in the private sector and they know it which is why they fight tooth and nail to keep their job.
I'll put it to you this way, if someone can leave a large Canadian pension fund, cross the street and go work at a Brookfield, Blackstone, KKR, Citadel, Millennium, Goldman and the list goes on, then they'd jump at the opportunity.
And don't throw André Collin in my face as he bought himself that job at Lone Star after investing billions with the fund as head of Cadim and Real Estate at PSP Investments, did very well there (I'll give him credit for surviving Grayken that long) and recently retired and was replaced by a former PSP colleague of mine, Jérôme Foulon who was just appointed Global Head of Commercial Real Estate there (good for him and Collin who is now worth a quarter of a billion or more).
My point is this, in the history of Canada's large pension funds, nobody has ever left a cushy well paid job to start their own fund and make it big on their own, nobody.
Sure, I know, some guys left OTPP to start a private equity fund and are doing well but they had big backers (billionaires and pension funds) and it's really not the same as starting something from scratch.
[Details: Erol Uzumeri who worked at Teacher's Private Capital hooked up with Eric Zinterhofer from Apollo Management and Oliver Haarmann of KKR and founded Searchlight Capital with seed money from PSP Investments. And Steve Faraone and Mike Murray left Teachers' Private Capital and founded Peloton Capital Management with billionaire Stephen Smith who is the chairman and co-founder.]
All this to say whenever I hear "they can make so much more in the private sector," I think to myself "no they can't and if they could, they would."
But it's still a tough job managing a global pension fund and at the CEO and senior executive level, there are constant pressures to perform and their job is nowhere near as glamorous as you think.
They know they have benchmarks to beat, directors to answer to and they are primarily compensated on the long-term performance of their fund as they should be.
Pension funds aren't hedge funds, they are there to ensure that money is invested wisely to meet the long-dated liabilities of their members’ pension plan.
That might sound easy but it's far from easy because every day there are people looking across public and private markets all over the world deciding where are the best opportunities on a risk-adjusted basis.
And the bigger funds are also worried about scale, they need strategic relationships with top partners (private equity funds and other major investors) to properly scale into investments, co-investing with them to reduce fee drag.
When things go well and they add value over the long run, sure they get paid well, and they know it, but when things are not going well, their compensation is impacted and their jobs are on the line.
Now, getting back to the table above, I think it's instructive to look at the compensation of senior execs across Canada's large pension funds:
AIMCo:
BCI:
CDPQ:
CPP Investments:
PSP Investments:
OTPP:
OMERS:
A couple of quick remarks.
I caution you to be careful reading and comparing compensation. Typically, the longer someone is at a pension fund, the higher their compensation is.
There is a detailed discussion on compensation and how it is determined in each annual report.
I don't know where this reporter got $7M total compensation for Deb Orida as it's just below $5M except I remember she negotiated some bonus payments owed to her for leaving CPP Investments.
Compensation is important to attract and retain qualified staff to manage pension investments across public and private markets (they internalize costs as much as possible instead of paying huge fees to outside managers).
These pension funds have captive clients so from that standpoint, all the senior execs are well compensated and they know it.
They also have detailed severance packages and most enjoy a hefty defined benefit pension.
That is the only thing in common with civil servants.
Alright, going to wrap this up but key point is compensation is based on long term performance and aligned with interests of beneficiaries and key stakeholders (never mind what the government of Alberta thinks).
Below, Canadian Prime Minister Justin Trudeau speaks in parliament following US President-elect Donald Trump's threat that he plans to implement a 25% tariff on imports from Canada and Mexico as a tactic to stem the flow of migrants and drug smuggling.
Tell me again why he is worth almost half a million dollars a year? (don't get me started)
Update: After reading this comment, PSP's former CEO Andre Bourbonnais sent me this:
I think you forgot two CPP alumni …Yann Robard who built an incredible secondaries platform from scratch at Dawson ( formerly Whitehorse) and David Allen in London who built Albacore, a very successful private credit fund.
I told Andre that I never heard of Yann Robard but I have heard of David Allen and I thought he seeded him at PSP when they introduced and ramped up private debt as an asset lass (thus reinforcing my point that it takes pension fund backing to make it big on your own).
Andre responded:
We did (seed him) but nevertheless he started from scratch and built it into a multi billion private credit platform. David didn't have any backing when he made the decision to start his own firm. He had to convince me… and I’m a tough client!
Ok, fair enough, I'll add David Allen and Yann Robard to the (really small) list of former Canadian pension fund managers who were extremely successful going on their own (with some help).
Update #2: Paul Desmarais, Chairman and CEO of Sagard, posted this comment on LinkedIn:
Thank god Canada pays for talent. The alternative is a mess. We have a pension plan system that is the envy of the world specifically because we pay for talent. I wish we paid all civil servants more. It would broaden the talent pool and drive performance like we see in Singapore and other countries that are highly functional. There is no secret to success. Show me the incentive and I will show you the outcome.
Well, it's not exactly our pension system but the Canadian pension model which is the envy of the world but he's right that incentives and outcomes matter and I replied:
Spot on, outcomes matter and all our pension plans are fully funded as opposed to US state plans which are for the most part chronically underfunded. Good pension plans provide retirement security to many retired Canadians who are able to spend money knowing their pension benefits are secure. They help the overall economy which is why smart retirement policy is smart economic policy. All this to say you get what you pay for, if you want to pay civil servant salaries you will not attract top talent to our large pension funds. Thanks for sharing your thoughts and I like your idea of introducing better incentives in the civil service (if only it was possible).
Bottom line: Canada's large public pension fund managers are not civil servants, they're professional pension fund managers with huge responsibilities and they're expected to perform over the long run.
By paying them properly, these organizations are able to attract and retain qualified staff to internalize their money management activity as much as possible instead of farming it out to external managers which will charge huge fees. That cost savings is passed on to the beneficiaries of the plan.
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