Canada's 2018 Power 100 Club?

Nov 09 00:11 2018 Print This Article

Chief Investment Officer came out with its 2018 Power 100 list:

For the seventh iteration of the Power 100, confidence is key, and as we approach potentially choppy waters in 2019, maintaining that confidence will be essential to timing the markets. That’s why these asset owners are the best of the best in 2018.It’s easy to flourish in a bull market, but as we saw this year, anything can happen in an instant. Throughout a swath of selloffs and rallies, these esteemed asset owners kept their cool (and their patience) to deliver stellar returns and innovate new concepts to their strategy as they rolled with 2018’s punches.Speaking of innovation, our selections took full advantage of their abilities to secure their slots, (innovation accounts for 50% of our methodology). They also made their best effort to reach out to their peers and collaborate some of the highest-profile deals of the year.Chris Ailman, Britt Harris, and Robin Diamonte have kept their 2017 spots in our top five leader bracket, but they are joined by Lim Chow Kiat and Ash Williams, who have made dramatic ascensions from their #10 and #13 ranks of last year.You can view this year's Power 100 list here and the profiles here.There were a few Canadians who made the list, however, only two of them had profiles. First, Mark Machin CEO, Canada Pension Plan Investment Board who is pushing for radical diversity:Diversity, efficiency, and responsibility are essential to the long-term success of any investment firm, especially the largest retirement organization in Canada.Mark Machin, President and CEO of the Canada Pension Plan Investment Board, is ensuring that success daily for the body’s beneficiaries and it’s $366.6 billion in assets.Machin is a believer in diversity, not just across asset classes, but in the boardroom as well. This year, the firm’s sustainable investing team put board effectiveness as a major focus area for its goals, which also include climate change, water, human rights, and executive compensation. That means more women and people of color on company boards, and better corporate governance structures to help keep those companies running —and growing— for years to come.“While there’s much talk about companies bringing broader perspective to the boardroom, it’s not consistently accompanied by action,” he wrote in an opinion piece in the Globe and Mail titled “How CPPIB is advocating for more women on boards.”“It’s crucial for companies in which we invest capital to assemble boards that reflect the full range of talent available,” Machin said in a recent statement. “If companies don’t take the required action to achieve the board effectiveness that today’s business environment requires, it falls to investors to provide a nudge, and when necessary, a push.”The fully funded CPPIB is committed to urging those companies to rigorously evaluate their directors, including their gender makeup,” he wrote, adding that the plan believes companies with diverse boards are “more likely to achieve superior financial performance.”Last year, Machin and staff helped push for change at 45 Canadian companies that it invested in, which had no female directors. Almost half of those companies have added women to their director seats since. The same was done earlier this year for 22 other companies, where the organization voted against six nominated chairs, and against the entire board slate for seven more.“By signaling that board effectiveness is a core topic of engagement for us, CPPIB urges other large institutional investors to send similar messages that they, too, believe the pace of change must accelerate,” he said in the newspaper column.This CEO has a 98% approval rating on job and recruitment site Glassdoor. That’s not an accident. Machin remains staunchly committed to the Canada Pension Plan Investment Board’s goals of long-term sustainable companies.Some of his investment decisions include considerable private equity ventures and green initiatives to keep the risk as low as possible. This year, the firm became the first pension fund in the world to issue green bonds, and announced plans to expand its renewable energy portfolio by more than $3 billion. The fund takes a direct investment approach to private equity and real assets, and is long on these vehicles.“Our intention is to hold direct equity investments for several years—and even decades in the case of infrastructure or energy investments,” it said in its report.The organization’s assets are well-diversified, both by assets and region, as only 15% of that $366.6 billion stayed in Canada. Its asset mix, as of March 31, was 38.8% public equities, 20.3% private equity, 12.9% real estate, 11.1% government bonds, cash, and absolute return strategies, 8% infrastructure, 6.3% credit investments, and 2.6% in other real assets.As for global diversification, 37.9% of those assets were in the US, 20.4% Asia, 13.2% Europe (excluding UK, which had a 5.6% allocation), 3.5% Latin America, 3.1% Australia. The remaining 1.2% was scattered across other parts.In fiscal 2018, the Canada Pension Plan Investment Board returned 11.6%, slightly down from 2017’s 11.8%, but still impressive. Over the past 10 years the fund has returned 8%, and 12.1% over the last five.I'm not surprised Mark Machin made the Power 100 list (#10) nor that he received a 98% approval rating on job and recruitment site Glassdoor. I only met Mark once but he struck me as a very nice, intelligent and thoughtful leader who cares about his employees and having the right culture at CPPIB.On the issue of diversity, I agree with CPPIB and other institutional investors pushing for more women on boards. It's 2018, women are probably more important contributors to the economy than men, it's totally unacceptable to lack gender diversification on boards.Also, Mark Machin is the head of the Canada Pension Plan Investment Board, the biggest and most important pension fund in the country. Half the contributors are women so he's right to ask the companies they invest in to have more female representation on boards.But I'm going to share something here even if some of you think it's unjustified or controversial. Canada's large pensions aren't that different from large banks, large Crown corporations and large government offices and when it comes to gender diversification at all levels of their organization, there is still a lot more work that needs to be done (let's not kid each other, it's still an old white boy's club, especially the higher you go in the organization).No doubt, it's getting better and will get better over the next decade but there is still way too much gender inequality and lack of equal representation at all levels of the organization.And for some groups, like people with disabilities, there is no effort whatsoever to attract, accommodate and retain them. None, all they state is "we do not discriminate against applicants based on race, color, sex, religion, national origin, disability or any other status or condition" but a lot of that is just posted for legal reasons, the reality is quite different.Importantly, and I've written about this before, there should be a comprehensive diversity report in the annual report which provides hard statistics on how each organization is addressing diversity within its workplace at all levels of the organization.Saying you don't discriminate but never bother to follow up with concrete actions to promote diversity at all levels is akin to window dressing, it looks good on the outside but it's covering up a serious deficiency on the inside and sends the wrong message internally.Again, you don't have to agree with me, I'm calling it like I see it and in private conversations, many leaders have admitted to me they can do a lot more to promote diversity and inclusion within their organization at all levels.It might not be easy but nothing worthwhile ever is.Still, I have to applaud Mark Machin's efforts for promoting diversity outside and within CPPIB. I know it's something he believes in and takes very seriously.The other profile I wanted to cover is Vincent Morin, president of Air Canada's Pension Plan who discussed how Air Canada retooled its structure for better returns and lower pension plan risk:

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About Article Author

Pension Pulse

Leo Kolivakis is an independent senior economist and pension and investment analyst with years of experience working on the buy and sell-side. He has researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de dépôt et placement du Québec (Caisse) and the Public Sector Pension Investment Board (PSP Investments). He's also consulted the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system.

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