(October 14, 2013) – Mark Wiseman has led the Canada Pension Plan Investment Board (CPPIB) for just 15 months, but has become one of the world’s leading investors during that time.
In fact, according to aiCIO, Wiseman was the most powerful asset owner on earth last year. Canadian Business magazine likewise ranked him as the country’s most influential businessperson—besting Prime Minister Stephen Harper by six places.
Under Wiseman’s leadership, the C$189 billion pension fund has made massive direct infrastructure and property purchases, strong-armed corporations into better governance practices, and become a sought-after co-investment partner.
aiCIO’s Managing Editor Leanna Orr recently caught up with Wiseman, and spoke about the fund’s burgeoning size, the genesis of the Canadian model, and what’s on his reading list.
aiCIO: A number of the leaders at Canadian funds seem to have gotten their start at Ontario Teachers' at around the same time as yourself, including AIMCo CEO Leo de Bever and Teachers’ CIO Neil Petroff, among others. Did Teachers' HR department have an exception eye for CIO material, or was there something about that environment that fostered pension fund leaders?
Wiseman: It all started with Claude Lamoureux, who was my boss at Teachers’. He deserves all the credit in the world for the early days, and having a vision of creating a professional asset management environment in a public pension. This model goes back to the early ’90s. Teachers’ set the precedent in terms of creating a professional asset management ethos, performance, and culture. It’s not surprising that that organization was a foundation for a lot of people that have gone on to be fairly successful in the investment management industry and in public sector. I think Claude—and I’ve said this many times—really had the vision when he came from MetLife to Ontario Teachers’ around 1990. He demanded professional governance and high performance: A lot of us in the industry cut our teeth at Teachers’ as a result.
Given the size of CPPIB’s team and portfolio, how do you keep a handle on all of it as CIO? Is there a point at which you foresee the fund becoming unwieldy?
In terms of the size of our organization, as large as we are, we are still middling on a global scale. I saw a recent report that placed us at 17th largest among our peers worldwide. There is plenty of room to grow—and many examples of much larger funds than ours. Think of organizations like the Norwegian Pension Fund Global—which is now north of $750 billion—or the China Investment Corporation [$533 billion]. GIC and the Abu Dhabi Investment Authority [ADIA] don’t report their assets under management, but with ADIA the best guess is near a $1 trillion, with GIC south of that. [Note: Other estimates put ADIA in the $650 billion range] On top of those funds, there are the global asset management firms, such as PIMCO, BlackRock, and also the Canadian asset management companies. So really, we’re not that big.
I was out in Edmonton yesterday talking to Leo de Bever [CEO of AIMCo], and similar to Michael Sabia [CEO of the Caisse], he is running an organization with multiple clients. Doug Pearce at the BC Investment Management Company was in the same position. It gets complicated.
We have a real advantage because we’re managing a single pool of assets with a single set of inflows and liabilities. We’re able to really focus on the task at hand, which is allocating capital and following our mandate: investing to maximize returns without undue risk. For us, scale is actually an advantage. Being a single pool of assets in an advantage. It allows us to build our internal capabilities, and allows us to be global and diversified. We’ve built a team. culture and organization with scale in mind. Another thing that separates us from other asset managers is the predictability of our assets. We know with a high degree of certainty that we will be getting capital inflows for roughly the next decade.
Neil Petroff, CIO of Ontario Teachers' Pension Plan, told me his fund’s greatest long-term risk is longevity, while CPPIB's is its heavy inflows of cash. Would you agree with this assessment? How are these flows funneled into the portfolio?
We are essentially 100% invested every day, and manage those inflows by putting them passively into equities. That way, they’re at work for the fund while we decide if and where to redistribute them.
Tell me about a time you got something wrong, in this position or a prior one.
For sure, I have made investment errors and we have as an organization. We are in the business of taking risk, and that’s why we’re making returns. Making a mistake in the investment world, in my view, goes with the territory. But what isn’t excusable is making the same mistake twice. We spend an awful lot of time thinking about where we’ve made errors. The art of investing is learned over time—you can’t just apply financial models.
Claude Lamoureux—the former president and CEO of Teachers’—would say there are two types of investment mistakes: errors of commission versus errors of omission. The first type is when an investment turns out poorly. It’s easy to spot. You know you’ve made a mistake, because you’ve lost money—sometimes all your money. Most investment professionals spend less time thinking about the second type, and we’re trying to train ourselves to focus on them. What are the opportunities we turned down? Where did we not bid? Where could we have stretched for an investment, but didn’t? As Claude Lamoureux taught me, the second type of errors are just as costly to an organization as the first type. And when I think of my career, I believe errors of omission have been far more costly.
In terms of management, the biggest errors are people errors. They arise from compromising on culture. The mistakes I’ve made have largely been where I’ve hired someone, looked at their talent, but not spent enough time on the other aspects. Who are they as a manager and as a person? As an organization that prides itself on culture, integrity, high performance, whenever we’ve compromised on this, it’s been a mistake that I’ve regretted. The amount of damage someone can cause who’s not a cultural fit is immeasurable.
What is your favorite book?
I can’t answer that question at this point, because I have a whole stack on my reading list. Right now I’m reading The Intellectual Venture Capitalist—a story of John McArthur, who is a great Canadian and the former dean of Harvard Business School.
If not leading CPPIB, would you rather be the CIO of a major US public plan or head of a sovereign wealth fund?
If I couldn’t have my job at CPPIB, I would absolutely be pursuing a professional ice hockey career, as a starting defenseman. Honestly, it’s just a matter of time before someone in the NHL spots my talent in the local beer league...