CPP Investments Creates New Active Public Markets Unit as Active Equities Struggle
Canada Pension Plan Investment Board is laying off dozens of employees from its active equities division and will merge the department with another unit after several years of underperformance, two sources with knowledge of the decision said.
The cuts affect a large part of the department’s employees, though a majority of staff will stay on and some of the affected employees may find roles in other departments, the sources said.
Frank Ieraci, a senior managing director who led the active equities division since 2020, and joined CPPIB in 2007, is among the employees who are departing, the sources said.
The Globe and Mail is not identifying the sources because they were not authorized to discuss internal CPPIB decisions.
The active equities strategy will be merged with CPPIB’s capital markets and factor investing division, which is led by senior managing director Heather Tobin. She will lead the combined unit.
On Tuesday, CPPIB released its financial results for the fiscal second quarter, which ended Sept. 30, and confirmed in a news release that the combined department let by Ms. Tobin will be called Active Public Markets, but did not mention job losses.
“This logical evolution brings together two related and complementary investment activities in one stronger team, enabling us to deliver greater value for the CPP Fund,” the news release said.
A CPPIB spokesperson declined to comment.
The fund also announced Tuesday that chief operating officer John Webster is leaving after five years at CPPIB.
CPPIB manages $864-billion of assets on behalf of more than 22 million working and retired Canadians who contribute to the Canada Pension Plan, and is the country’s largest pension fund.
In the three months that ended Sept. 30, CPPIB’s overall fund lost 0.5 per cent, or $4.7-billion, as concerns about inflation and the potential for a long period of higher interest rates dragged down bond prices.
“Higher bond yields weighed on fixed-income returns this quarter, while diversification across the portfolio helped offset some of that pressure,” chief executive officer John Graham said in a statement.
CPPIB’s net assets increased by $2.6-billion to $866.2-billion in the quarter as the fund received $7.3-billion in net transfers from the CPP, offsetting the investment loss.
Over a 10-year span, CPPIB’s average annual return is 8.8 per cent.
The active equities unit invests in public companies and those that are soon to be listed publicly, relying on proprietary research to make “high-conviction” bets on individual companies.
But the strategy has struggled for years. It lost $3.5-billion in CPPIB’s 2026 fiscal years, which ended March 31, and has lost a total of $6-billion over five years.
Over a 10-year period, the active equities division has earned only $1.9-billion.
As of the end of CPPIB’s fiscal first quarter, which ended June 30, the active equities division had $36.8-billion of assets under management.
The active equities strategy takes both long positions on companies the investment team believes are undervalued, and short positions on companies that it expects will fall in value, aiming to profit from the difference in performance.
In the fund’s most recent annual report, CPPIB attributed the poor performance in part to losses incurred in the 2022 fiscal year after regulatory changes in China, which contributed to CPPIB’s decision to reduce its exposure to the country.
In 2026, the active equities team’s long positions in stocks underperformed corresponding short positions in sectors such as financials and industrials, as well as media and telecommunications. That was compounded by high volatility in markets, CPPIB said in its annual report.
Editor’s note: A previous version of this article incorrectly stated that a smaller number of employees than those affected by the cuts will stay on. In fact, a majority of staff will stay on.
Layan Odeh of Bloomberg also reports Canada's top pension merges Active Equities arm, cuts dozens:
Canada Pension Plan Investment Board is merging its struggling active equities unit with another department after years of weak performance.
The group will be combined with CPPIB’s capital markets unit to create a new department called Active Public Markets. It will “invest across a broad range of public market asset classes” using a mix of internal strategies and external partners, according to a statement Tuesday that also announced quarterly results.
Heather Tobin will lead the new department. Frank Ieraci, the global head of active equities, will leave the fund. The active equities unit employed 120 people as of March 31, according to CPPIB’s annual report. Most will move to the new department, but the restructuring will still result in dozens of layoffs, according to people familiar with the matter. The Globe and Mail reported the job cuts earlier.
The move comes amid mounting losses. The active equities portfolio, which executes long-short positions and other strategies, posted a C$6 billion loss ($4.2 billion) in the five years ended March 31. Last year’s losses reached C$3.5 billion. It was invested mostly in US and European stocks.
The decision reflects a broader trend by some pension funds to shift away from the higher costs of active strategies and toward index-tracking in certain asset classes. Europe’s biggest pension fund, Stichting Pensioenfonds ABP, is also ending its active equities strategy after the approach didn’t generate satisfactory returns. Last year, Ontario Teachers’ Pension Plan said it will lean into a passive equities strategy over active stock picking.
Overall, CPPIB posted a 0.5% loss in the fiscal second quarter ended Sept. 30 as fixed-income losses from rising bond yields more than offset gains in stocks, private equity and real assets. The pension plan’s assets grew to C$866 billion from C$864 billion at the end of June.
Alright, before I get into it, make sure you read the latest quarterly performance press release from CPP Investments here. Q2 F207 highlights are also available to download here.
I'm not going to cover CPP Investments' quarterly results but will hone in on these two bullet points im the press release under Corporate Developments:
- Announced the creation of a new investment department, Active Public Markets (APM), combining the advanced public markets capabilities of our Active Equities (AE) and Capital Markets and Factor Investing (CMF) teams. This logical evolution brings together two related and complementary investment activities in one stronger team, enabling us to deliver greater value for the CPP Fund. APM will serve as the organization’s active investment department for global public markets. It will invest across a broad range of public market asset classes and a diverse set of investment strategies using a combination of internal investment teams and trusted external partners, managed as a single integrated portfolio. These strategies span both discretionary and systematic investment approaches, drawing on distinct sources of return that respond differently as market conditions change, strengthening the diversification of the overall portfolio. Through this combination of breadth, expertise and partnership, the department will contribute distinct and durable returns to the Fund. Heather Tobin will lead the department as Senior Managing Director & Global Head of Active Public Markets. Frank Ieraci, Senior Managing Director & Global Head of Active Equities, has decided to step back from CPP Investments after a distinguished career at the organization, spanning nearly 20 years. His significant contributions include leading CPP Investments’ data-driven research, portfolio design and construction for Active Equities, and building strong investment talent within AE. Mr. Ieraci will remain as a senior advisor until through to the end of the year to support the establishment of the new department.
- After nearly five years with CPP Investments, Jon Webster, Senior Managing Director & Chief Operating Officer has decided to leave the organization. Mr. Webster began working with CPP Investments in 2022 and was appointed to his current role in 2023, where he was responsible for the organization’s technology, data, operations, security and corporate services functions.
So, here are my quick thoughts on Active Equities at CPP Investments.
I feel bad for Frank Ieraci and his team, but I'm not surprised, just like I wasn't surprised when BCI shuttered two global stock-picking strategies that oversaw about C$4.3 billion back in May, impacting Amy Chang and her team.
The Globe article notes the Active Equities division has struggled for years, losing $3.5-billion in CPP Investments' 2026 fiscal year, which ended March 31, and has lost a total of $6-billion over five years.
Over a 10-year period, the active equities division has earned only $1.9-billion.
Meanwhile, up until recently, passive equity strategies were outperforming led by technology names, especially chip stocks.
It's just a brutal market trying to manage a global equities portfolio using a host of factors when momentum is leading the charge, steamrolling everything else.
And that was the case up until October of this year when hedge funds deleveraged and tech stocks got clobbered.
Last week, some large hedge funds liquidated positions, adding to the tech rout.
And this week, Nvidia's CEO Jensen Huang is embroiled in a sex/ spy scandal, adding more pressure to chip stocks throughout the world (when it rains, it pours).
These are tough, tough markets. Even the best hedge funds are finding it hard to perform in this environment.
And if you don't believe me, ask Heather Tobin, who will now lead the new department as Senior Managing Director & Global Head of Active Public Markets.
External hedge funds have done extraordinarily well over the last five years, but that streak may be coming to an end.
Trust me, I have allocated to the very best hedge funds in the world. I went toe-to-toe with famous managers, and I used to grill them hard.
If I had to do it all over again, I'd be an even bigger pain in the ass because I know A LOT more now about markets and trading properly.
These are tough markets, and even the best managers can succumb to insane volatility.
So, while I feel bad for Frank Ieraci and his team, I'm not surprised.
I'd rather sit in Heather Tobin and her team's shoes, for now (their job will not get any easier, I guarantee you that).
The ball is in their court now; they have to deliver the long-term performance.
That's pretty much all I have to say on this latest executive shakeup.
I wish Frank Ieraci and the people on his team who were affected all the best. The same goes for Jon Webster, who seems like a really nice and competent guy to me.
Lastly, before I forget, Michael Friesen, formerly a risk manager at CPP Investments (a lot of good risk people were let go as well this summer), sent me this following my recent post on CPP Investments' credit boss warning of a bubble-like AI rush:
"I would add that lending to other private funds has an additional benefit other than direct spread compensation vs credit risk, for multi-asset class investors such as a large pension fund. The fund finance lending terms can stipulate certain types of regular reporting on the underlying collateral - which can give insights on what areas of the *private* economy are under stress (or not). And that is a source of additional intelligence where investment committees have members from different business areas, since it can give an advance view from one area of private markets on what could lead to other opportunities to locate and pounce on soon-to-be distressed assets in other areas of private markets."
I thank Michael for sharing his insights with my readers and wish him the best.
Below, Frank Ieraci on the state of markets, why coding software has dethroned excel as the platform investors must master and how mentorship is being underrated now (from 3 years ago).
Next, in this Money Maze podcast, Heather Tobin, Senior Managing Director & Global Head of Active Public Markets, discusses the changed topography of the hedge fund world. She explains their approach to diversification, conviction, manager selection, liquidity, fees and how CPP Investments calibrates risk.
She also discusses how this allocation is married within the total portfolio, their red lines, why a manager might be included or excluded and the usual length of investment once made.
Very few people know that CPP Investments manages one of the largest hedge fund portfolios in the world, investing in established managers and seeding new alpha managers as well (they keep it on the down low; beats me as to why, worst kept secret). Listen carefully to Heather Tobin's insights.
Update: An experienced investment professional contacted me to remind that “CPPIB has been doing internal snd external alpha for a very long time” and they have merged and disentangled and re-merged these programs before.
He said the real problem is structural alpha isn’t scalable to the size the Fund is trying to do. “If you look at large hedge funds, they all run into capacity issues at half or a third of the size CPPIB is trying to do. They have a long/short global equity portfolio of $60 to $80 billion notional they fund via shorting stocks so it’s not on their balance sheet. That is just way too big to extract meaningful alpha and the results speak for themselves.”
Of course, this begs the question whether internal alpha strategies pass the same rigorous due diligence external alpha managers go through. If not, why not? Who owns these strategies and does the risk group kick the tires properly?
Perhaps more importantly, should CPP Investments follow other large Canadian pension funds that have adopted passive equity strategies?
All things to think about as you read about Active Equities at CPP Investments and the struggles that team has faced.
I thank this person for sharing his insights with me.
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