James Bradshaw of the Globe and Mail reports Ontario appoints veteran director Robert Poirier to lead review of OMERS governance model:

Ontario’s government has appointed businessman and corporate director Robert Poirier to lead a review of governance at Ontario Municipal Employees Retirement System, choosing a board member from one of the pension fund’s critics.

The province has handed Mr. Poirier a 10-month mandate to examine the effectiveness of the model for governing OMERS, which is steered by two boards of directors, and whether it has engaged clearly enough with its members.

Mr. Poirier is the chief executive officer of NeuState Advisory, a firm he founded, and a former executive in the pensions division of asset manager State Street Corp. He was the long-time chair of the Toronto Port Authority and, earlier in his career, advised a committee of Canada’s Senate on issues that included the creation of major public-sector pension funds such as the Public Sector Pension Investment Board.

Until last month, he was also a board member at transit agency Metrolinx – one of multiple OMERS employers that wrote to Ontario’s government in June asking for an urgent review of the pension fund’s governance structure.

Ontario’s Municipal Affairs and Housing Minister Paul Calandra ordered the review in August. He was responding to pressure from associations representing OMERS members that complained to government about the pension fund’s governance, including a perceived lack of transparency from one of the pension fund’s two boards.

The review’s mandate is similar to one that former senior public servant Tony Dean followed in 2012 when he led the last provincial review of OMERS governance.

A spokesperson for Mr. Calandra, Justine Teplycky, said Mr. Poirier was screened by the Office of the Integrity Commissioner of Ontario before his appointment was finalized, and resigned his Metrolinx board seat on Nov. 20 – two days before he was appointed to lead the review.

“Mr. Poirier is well-positioned to lead the review with his advanced understanding and familiarity with pension plan governance and administration, as well as strong executive leadership skills,” Ms. Teplycky said in an e-mailed statement. “He will undertake a governance review of OMERS to ensure that its governance model is serving the interests of plan members in a fair, equitable, and transparent manner that supports the plan’s long-term financial sustainability.”

Mr. Poirier declined to comment and directed questions to the province.

The target of the members’ complaints, which were spearheaded by associations representing police and firefighters, has been the Sponsors Corporation (SC) board at OMERS. It makes board appointments, sets benefits and contributions, and monitors the plan’s long-term health.

A separate Administration Corporation (AC) board oversees the fund’s investments, plan valuation and pension administration.

The chair of the AC board, George Cooke, welcomed Mr. Poirier’s appointment in a statement.

“We are supportive of the review and see it as the right forum to build on the governance work initiated by the 2012 review,” Mr. Cooke said. “We are committed to fully cooperating with Mr. Poirier, and all stakeholders, to ensure we deliver the best possible outcome for our 628,000 members across Ontario.”

Some OMERS members felt the SC board had blindsided them with planned changes to contribution rates starting in 2027 that will require certain employees to pay more into the plan, though about 70 per cent of members will pay the same or lower amounts. Police, firefighters and other employees who earn more than $90,000, as well as some employers, will pay higher contributions – about $15 to $20 more per pay period for most police officers.

In a letter to Ontario Premier Doug Ford dated June 20, 2024, and reviewed by The Globe and Mail, Metrolinx board chair Donald Wright raised the contribution issue and wrote that “my fellow Board members and I” have growing concerns about the pension fund manager, including a perceived lack of consultation by OMERS on governance matters that affect employees’ financial futures.

Mr. Poirier was a Metrolinx board member at the time the letter was written, which could raise questions about his impartiality as the review’s leader. But the heads of two police associations that asked for the review welcomed Mr. Poirier’s appointment.

“We do not have any concerns about the appointment at this time, and have had no past involvement with Mr. Poirier,” said Clayton Campbell, president of the Toronto Police Association, in an e-mailed statement. “We’re eager to have the review get started and look forward to meaningful changes that will benefit our members.”

Police Association of Ontario president Mark Baxter said in an e-mailed statement that he hopes the review will make the OMERS SC board “more transparent and accountable to members.”

“Mr. Poirier is a qualified business person who has sat on many successful boards and we look forward to supporting his work with this review,” Mr. Baxter said.

Mr. Poirier was appointed on Nov. 22, according to a government notice. He has until Sept. 19 to complete his work, though he could finish sooner. According to the notice, he will be paid a per-diem rate of up to $1,500 for a maximum of 235 days, with total potential compensation capped at $352,500.

The current review will not cover the financial sustainability of the plan or OMERS’s investment performance, nor will it revisit the proposed changes to contribution rates.

I've already discussed why Ontario's government launched a governance review at OMERS here. 

I'm not going to get into it again except to say it's time to get on with it and in my humble opinion, it's time to do away with this dual board which none of OMERS' large peers have (one is plenty).

I don't know Robert Poirier but he is eminently qualified to review the governance at OMERS.

And while he was a Metrolinx board member at the time the letter was written, which could raise questions about his impartiality as the review’s leader, I'd wait to see the final report before making any such conclusions.

Again, for me it's straightforward, OMERS is a large global pension fund but it doesn't need two boards.

Still, I will wait to read the final report to see what Mr. Poirier has to say.

In other news, Paula Sambo of Bloomberg reports OMERS' private equity arm buys IT firm Integris from Frontenac:

 Omers Private Equity is buying a majority stake in Integris, a US cybersecurity and IT consulting company, from Chicago-based Frontenac Company LLC for an undisclosed amount.

The deal marks Omers’ entry into the IT managed-services industry, according to a statement seen by Bloomberg News. The Ontario Municipal Employees Retirement System is one of Canada’s largest pension managers, with net assets of C$133.6 billion ($95.2 billion) as of June.

The management team at Integris will remain in place, Omers said.

Integris, which is based in New Jersey and was formerly known as Domain Technology Group, focuses on providing IT services to small- and medium-sized businesses. It has offices along the US east coast and in the midwest and south.

Frontenac bought it in 2020 and merged it with other firms to form Integris in 2021, then supported it through several acquisitions.

“Integris is a world-class platform that excels in delivering expert outsourced IT services and customer support in an industry with significant growth potential,” Eric Haley, head of buyout at Omers Private Equity, said in the statement. 

On Tuesday, OMERS Private Equity issued a press release on this acquisition:

OMERS Private Equity today announced the signing of a definitive agreement to acquire a majority stake in Integris (“Integris” or the “Company”) from Frontenac, a Chicago-based private equity firm. Financial terms of the transaction were not disclosed.

Integris offers a full suite of outsourced IT, cloud, and cybersecurity services to small and medium-sized businesses across the United States. Headquartered in New Jersey, the company supports its customers nationally through its network of offices on the East Coast, in the Midwest and the South.

The partnership with Integris marks OMERS Private Equity’s entry into the IT managed services provider (MSP) space – a large and rapidly growing sector that delivers IT services to small and medium-sized businesses across various industries. OMERS Private Equity will support management in maintaining its impressive track record of profitable growth, both organically and through strategic acquisitions.

“Integris is a world-class platform that excels in delivering expert outsourced IT services and customer support in an industry with significant growth potential,” said Eric Haley, Senior Managing Director and Head of Buyout, OMERS Private Equity. “This investment provides an opportunity to establish our presence in the sector and enhance our business services portfolio, backed by a team with deep industry expertise and a strong, customer-centric reputation.”

“We are excited to welcome Integris to our portfolio to continue building on what is already an impressive culture, platform, and strategy,” said Geoffrey Bird, Managing Director and Head of Business Services, OMERS Private Equity. “Equally critical is that Integris' proven leadership team will remain at the helm, ensuring seamless continuity and the continued delivery of outstanding customer service.”

“As we embark on our next chapter, having the right partner is key to our continued success. With OMERS proven track record of scaling its portfolio companies, we are confident in our ability to drive continued growth and success for Integris,” said Rashaad Bajwa, Founder and CEO, Integris. “At the same time, we extend our sincere gratitude to Frontenac for its investment, leadership, and collaboration over the past four years.”

“OMERS Private Equity is the ideal partner to build on the strengths of Integris. Our organizations share a strong alignment in cultural values and a unified vision for the future,” added Glenn Mathis, President and COO, Integris. “With their support, we will continue to raise the bar, expanding our national footprint and serving an even larger customer base.”

The transaction is expected to close in December 2024. DLA Piper acted as legal counsel and Baird served as financial advisor for Integris and Frontenac. Cravath, Swaine & Moore LLP acted as legal counsel for OMERS Private Equity.

About OMERS Private Equity

OMERS Private Equity manages investments globally on behalf of OMERS, one of Canada’s largest defined benefit pension plans, with C$128.6 billion in net assets as of December 31, 2023, including approximately C$25.1 billion in net private equity investment asset exposure. The team invests across Industrials, Healthcare, Business Services and Technology, deploying an evergreen capital base to partner with strong management teams and transform good companies into industry leaders around the globe. For more information, please visit www.omersprivateequity.com

About Integris

Integris is a national, managed IT service provider dedicated to helping small and mid-sized companies power their success through technology. Through a growing network of local service offices and gold-level partnerships with technology vendors, Integris provides companies with comprehensive and a la carte system platform management that’s responsive, secure, regulation ready, and tailored to their industry vertical. Founded in 2021, Integris offers clients the power of a national network, with the personal service of a nearby, local-market MSP. Integris appears regularly on the Inc. 5000 list of fastest-growing companies. Headquartered in Cranbury, New Jersey, Integris employs 600+ professionals nationwide. For more information, visit integrisit.com

About Frontenac

Frontenac is a Chicago-based private equity firm. The firm focuses on investing in lower middle market buyout transactions in the consumer, industrial, and services industries. Frontenac works in partnership with established operating leaders, through an executive-centric approach called CEO1ST®, which seeks to identify, acquire, and build market-leading companies through transformational acquisitions and operational excellence. Over the last 50+ years, Frontenac has built a franchise working with over 300 owners of mid-sized businesses as they address complex transition issues of liquidity, management enhancement, and growth planning. For more information, please visit www.frontenac.com

It's worth noting what Eric Haley, Senior Managing Director and Head of Buyout, OMERS Private Equity said about this deal:

“Integris is a world-class platform that excels in delivering expert outsourced IT services and customer support in an industry with significant growth potential. This investment provides an opportunity to establish our presence in the sector and enhance our business services portfolio, backed by a team with deep industry expertise and a strong, customer-centric reputation.” 

Also worth noting what Geoffrey Bird, Managing Director and Head of Business Services, OMERS Private Equity stated: “Equally critical is that Integris' proven leadership team will remain at the helm, ensuring seamless continuity and the continued delivery of outstanding customer service.”

To understand why this is a great deal even though financial details weren't disclosed, you need to go back to September 2020 and read about when Frontenac acquired Domain Computer Services and merged it with Tier One Technology Partners to create a leading premium MSP platform (now called Integris):

Domain Computer Services (“Domain”), a New Jersey-based managed IT services provider, announced it has completed a merger today with like-minded Maryland managed IT services company, Tier One Technology Partners (“Tier One”), to form a premium national MSP platform. To propel their growth, the companies also announced a recapitalization in partnership with Frontenac, a Chicago-based private equity firm. Financial terms of the transaction were not disclosed.

Domain and Tier One specialize in managing the IT and cybersecurity needs of top-tier professional services firms. Both companies have been recognized as award winning MSP industry leaders in several verticals: Domain in legal and financial services and Tier One in non-profit. Together with Frontenac, they are on a path to build a premium national provider of managed IT services by partnering with other MSPs that share their values of operational excellence, vertical focus, employee engagement and development.

The combined firm will be led by Rashaad Bajwa as CEO, Jim Kehres as Managing Director of the Maryland/DC market and Kris Laskarzewski as Managing Director of the NJ/NY/PA market.

Rashaad Bajwa, CEO of Domain, said, “When we set the intention of building a national MSP platform, I knew that Dave and Jim at Tier One were one of the first conversations I was going to have. We’ve worked together closely for years as peers in ITNation Evolve; joining forces with them and Frontenac as our partner fulfills our vision of building a premium MSP platform focused on people, process and reputation.”

“After knowing Rashaad for years through our professional peer group, I knew and respected Domain as a leading MSP. When Rashaad approached me about bringing Domain and Tier One together, I quickly realized this could be a dream team,” stated Dave Shaffer, CEO of Tier One. “Together with Frontenac, they care about the things that matter most – our people, our clients and our reputation. This team makes a very attractive partner for best-in-class MSPs.”

Domain and Tier One found Frontenac and its executive-centric approach to be a natural fit as they were looking for the right partners to help them expand their MSP business. Joining the Board of Directors at closing is industry veteran Mike Jenner, who has 25+ years of experience growing technology services companies. Mike is the current CEO of ControlCase and is the former CEO of NexusTek. He will be joined on the Board of Directors by Corey Sisler, former CFO of NexusTek and CFO of Spectraseis.

Joe Rondinelli, Principal at Frontenac, said, “Together with Mike and Corey, we were attracted to Domain and Tier One because of their people, culture, best-in-class operations and exceptional client base. We see substantial white space in the industry and are excited to support management by investing in strategic organic growth initiatives and acquiring other like-minded MSPs.”

“Domain and Tier One fit perfectly with Frontenac’s franchise of investing in and growing best-in-class, tech-enabled services companies alongside extraordinary leadership teams,” added Michael Langdon, Managing Director at Frontenac. “We look forward to aggressively building out a national MSP.”

Honigman LLP served as legal counsel to Frontenac on the transaction. Szaferman Lakind served as legal counsel for Domain and Tier One.

About Domain Computer Services

Domain Computer Services is an IT managed services provider that focuses on cybersecurity, cloud services, IT consulting, and infrastructure. They offer unlimited on-site and remote support packages to clients in the New Jersey, New York and Philadelphia metro areas, with an emphasis on law firms, financial services and other high-end professional services. Domain was founded in 1997 by Rashaad and Michelle Bajwa. For more information on Domain, please visit www.go-domain.com.

About Tier One Technology Partners

Tier One Technology Partners is an IT managed services provider that focuses on cybersecurity, cloud services, IT consulting, and infrastructure. They offer unlimited on-site and remote support packages to clients in the Maryland and DC metro area, with an emphasis on the non-profit industry. Tier One Technology Partners was founded in 1998 by Dave Shaffer and Jim Kehres. For more information on Tier One, please visit www.tieroneit.com.

About Frontenac

Frontenac is a Chicago-based private equity firm. The firm focuses on investing in lower middle market buyout transactions in the consumer, industrial, and services industries. Frontenac works in partnership with established operating leaders, through an executive-centric approach called CEO1ST, which seeks to identify, acquire, and build market-leading companies through transformational acquisitions and operational excellence. Over the last 50 years, Frontenac has built a leading franchise working with over 275 owners of mid-sized businesses as they address complex transition issues of liquidity, management enhancement, and growth planning. For more information, please visit www.frontenac.com.

I would invite you to read more about Integris here and see their experienced leadership team, especially Rashaad Bajwa, founder and CEO:

Cybersecurity is a huge field and there are well-known giants like CrowdStrike but a lot of lesser well-known firms like Integris growing fast.

Lastly, as I noted in my comment on why OMERS is stopping to make direct private equity investments in Europe, there is a shift at OMERS in the private equity group..

Eric Haley is Head of Private Equity, Buyout and leads the OMERS Private Equity strategy and team, focusing primarily on direct PE investments. He is responsible for the strategic execution of our Buyout strategy and oversees OMERS Private Equity's investments in the business services, industrial, and healthcare sectors. 

The investment in Integris was made by OMERS Private Equity. Michael Block is Head of Private Capital and leads OMERS Private Capital strategy and team, which includes the development and execution of our new global funds and co-investment strategy.

[Note: Private Equity won’t be renamed Private Capital, they’re two separate entities: (1) OMERS Private Equity - majority buyout and (2) OMERS Private Capital - funds and co-investments.]

Below, Rashaad Bajwa, Founder & CEO of Integris explains how they premium technology solutions for small-to-medium-sized businesses across the country.

Mr. Bajwa also spoke about the changing state of office culture in the hybrid world during NJBIA's 2023 Insights and Outlooks summit (worth listening to this). 

Lastly, I'd be wrong not to take this opportunity to plug the great interviews Celine Chiovitti, Chief Pension Officer, OMERS, has done at the Pension Blueprint Podcast which you can view here.

Also worth noting that Nancy Nazer, Chief Human Resources Officer, and Celine have been honoured with one of the country’s most prestigious recognitions: the Women’s Executive Network (WXN)’s Canada’s Most Powerful Women: Top 100 Awards.

You can read details here and let me take this opportunity to congratulate them both on this well deserved award.

On Friday, PSP investments' former CEO Neil Cunningham sent me Bill Curry's Globe and Mail article on how Ottawa could reap $9-billion from surpluses in public-service pension fund, projections show:

Ottawa could potentially reap a $9-billion boost to its bottom line over the next few years, federal documents show, thanks to a growing surplus in the pension fund for public servants, prompting a standoff with unions over what should be done with the windfall.

Treasury Board President Anita Anand upset the major public-sector unions earlier this week when she announced that about $1.9-billion in the Public Service Pension Fund from the previous fiscal year will be shifted to general revenues. Labour leaders say workers also contributed to the fund and should benefit from any surplus, rather than having the money go toward other priorities such as new spending or reducing the size of the deficit.

The minister said the change is because the size of the surplus in the $186.4-billion fund has exceeded allowable levels.

However, in an analysis to be released Friday by the Public Service Alliance of Canada (PSAC), the union points out that new federal records show the government is projecting changes totalling $9.2-billion through 2028.

The figure is contained in a table from a special actuarial report that was also released this week showing that if the existing surplus continues to grow as projected, the federal government could partly pause its contributions to the fund in 2025, fully pause them the next two years and have a partial pause for 2028.

“I was quite shocked and disappointed that the government flat out omitted one major point: that they plan to give themselves the biggest holiday present,” said Sharon DeSousa, national president of PSAC, which is the largest of the unions representing federal public servants.

Ms. DeSousa said in an interview that rather than shifting funds out of the pension plan, PSAC would prefer to see changes to address an inequity in the current pension rules that requires newer workers to work more years to qualify for a full pension. She said any contribution holiday should also apply to public servants.

Ms. DeSousa said PSAC has been urging the government for months to consider such options in anticipation of a pension surplus decision. Instead, she said Ottawa is using the funds to improve its bottom line.

“They plan to do this on the backs of workers,” she said.

The special actuarial report, prepared by the Office of the Chief Actuary, said the value of the pension fund as of March 31, 2024, is $186.4-billion. The fund has a surplus of $38.8-billion over $147.6-billion in liabilities, which is a funded ratio of 126.3 per cent.

Federal rules say the plan cannot hold a surplus of more than 125 per cent of liabilities, defining such amounts as a “non-permitted surplus.”

The actuarial report said the fund’s return on investment earnings was 7.2 per cent in 2024, compared with the expected return of 5.8 per cent.

Each year that a projected surplus above the 125-per-cent threshold does in fact materialize, the government is required to take action to bring the surplus back within the limit. The actuarial report presents a government contribution freeze as a default scenario, but the government could choose to repeat this year’s practice of shifting the surplus to the consolidated revenue fund.

Myah Tomasi, a spokesperson for Ms. Anand, the Treasury Board President, said the government’s $1.9-billion transfer “will be held while next steps are considered,” in accordance with federal legislation governing the fund.

“Once this transfer is made, there will no longer be a non-permitted surplus in the pension plan, allowing the government to continue its contributions,” she said.

It is not immediately clear how these accounting adjustments will affect the Liberal government’s bottom line.

Finance Minister Chrystia Freeland has yet to announce a date for the fall economic update. The House of Commons is scheduled to sit until Dec. 17.

In last year’s fall update, Ms. Freeland pledged that the deficit for the fiscal year that ended in March, 2024, would not exceed $40.1-billion. Parliamentary Budget Officer Yves Giroux released a report in October that said it appears the government is heading toward a $46.8-billion deficit, meaning Ms. Freeland has missed her fiscal target.

Ms. Freeland has repeatedly declined to clarify whether her update will in fact show the target was missed.

Former parliamentary budget officer Kevin Page, who is now founding president and CEO of the University of Ottawa’s Institute of Fiscal Studies and Democracy, said only the $1.9-billion transfer announced by the minister this week is confirmed. The remaining amounts are projections.

“We might only know in the next federal budget whether the figures presented in the table represent a source of funds for other measures,” he said in an e-mail.

“It is the minister’s prerogative to use funds for other policy priorities as long as the fund requirements are met. Given that the increase in the funded ratio above 125 per cent is due to over-contribution by both employees and the government, one might expect that the contribution holiday could be shared by both parties.”

 As I stated, on Friday, PSP's former CEO Neil Cunningham sent me this article along with this note:

The concept of the federal government using the surplus funds in the Public Service Pension Fund (PSPF) for other purposes is, in my opinion, a good idea. But I am not supportive of the choice that the current government is making to use this surplus as a piggy bank to support their overspending on their various other priorities.
The recent discussion regarding Canadian pensions not investing sufficiently in Canada has missed a significant point regarding the difference between the PSPF and every other Maple 8 pension funds - that is that the PSPF is essentially a sovereign wealth fund wherein it is the federal government who is the plan sponsor and is on the hook for the full pension promise that is provided to its workforce. Being a federal fund with ALL Canadians participating as contributors and sponsors through our tax dollars makes this fund essentially a sovereign wealth fund, albeit with a primary purpose to pay the promised pensions.
As you well know, the PSPF investments are managed by the PSP and represents about 70% of PSP’s assets under management, the balance being the pension funds or the Canadian Army, Army Reserve and the RCMP. (What I outline here would also apply to these other pension funds managed by PSP, although the details and surpluses are not uniform). PSP has been over the long term an extremely successful investment firm and has built up the 126% funding surplus described in the article while staying within the risk limits proscribed by the Treasury Board, to whom PSP reports. This has been accomplished while maintaining a risk profile equivalent to what currently is a 58/42 equity to fixed income ratio (by comparison CPPIB’s risk tolerance expressed by their reference portfolio is currently 85/15). So what to do with the surplus?
The legislation covering the PSP specifies the 125% limit on funding levels, any excess being described as the “non-permitted surplus”. The Act provides Treasury Board with several options regarding how to deal with such a surplus that I will summarize as i) a funding holiday for the sponsor, and/or the beneficiaries, ii) an increase in benefits or iii) a lump sum withdrawal from the fund by the sponsor. I would propose an additional option which goes to the discussion on pension funds investing more in Canada.
Quite simply, Ottawa could transfer the surplus money into a separate fund that has a mandate to invest exclusively in Canada. This fund could be set up in a similar fashion to the Canada Growth Fund that was established two years ago and is managed by PSP with NO political interference in the actual investments - the government is responsible for the fund’s mandate and then getting out of the way and letting the investment professionals do their job. For various reasons, and I admit some bias here, the PSP would be the logical manager of this new Canada fund. 
And why stop there, why not increase the risk appetite of the PSPF beyond the current 58/42 to a higher but still very reasonable asset mix, like 70/30, with the expectation that the surplus would grow over time and be could be used to continue to finance this new fund?

I’ve simplified some of the details here, but I’m sure you get the idea - Canada has a terrific investment manager that charges zero fees other than paying the direct costs of running the place - why not optimize it to the long-term benefit of all Canadians that also addresses a long-standing issue of importance to Canada’s economy. 

What followed was a very interesting discussion with Neil on what can be done with the surplus to benefit the Canadian economy.

According to Neil, the Government can use that surplus at its discretion to create a new "Canada Fund" with an explicit mandate to invest only in Canada.

This new fund can be modelled after the Canada Growth Fund which the Government incorporated exactly two years ago:

Canada Growth Fund Inc. (CGF) is a C$15 billion independent and arm’s length public fund that will help Canada to speed up the deployment of technologies in its efforts to reduce emissions, transform its economy and support the long-term prosperity of Canadians.

CGF’s mandate is to build a portfolio of investments that catalyze substantial private sector investment in Canadian businesses and projects to help transform and grow Canada’s economy at speed and scale on the path to a low-carbon economy.

This CGF is managed by PSP Investments. Its President and CEO, Patrick Charboneau, is part of PSP's executive team but he answers to his own board of directors which is made up of a subgroup of PSP's board.

CGF has a clear mandate and is managed at arm's length from the government, just like PSP:

By partnering with PSP Investments, CGF benefits from PSP Investments’ deep investment expertise and track record across a broad range of sectors and strategies, a mature and scalable operational ecosystem and a governance framework that is independent and at arm’s length from the Government of Canada, allowing CGF to rapidly and successfully deliver its mandate. CGF Investment Management’s activities are operationally distinct from PSP Investments’ pension investment mandate, and the assets of CGF and of PSP Investments are not commingled.

Neil told me the expected long-term return of CGF is zero, its investment activities focus on three key sectors:

CGF is funded by the federal government (C$15 billion) with a clear mandate and it's actively ramping up its investments to meet that mandate (read latest interim report here and see their latest news here).

The best way to think of CGF -- even though it's not exactly like this -- is a clean technology venture capital fund but they are not looking to shoot the lights out in terms of returns and their investment mandate is broader.

Neil Cunningham followed up on our conversation stating this:

As a follow up to our conversation yesterday it occurred to me that it might to useful for me to differentiate between the Canada Growth Fund (CGF) created a few years ago and my suggested Canada Fund (CF). 
CGF as you know was created by the federal government in 2023 with a mandate to make investments that take on higher risk than what the private sector will invest in to fill the funding gap on innovative investment in Canada that are expected to reduce emissions, preserve Canadian IP in Canada, create long-term employment in Canada and leverage our natural resource assets. It has a venture capital element to it, but the long-term target return of the fund is to break-even - which would be considered a success if the other objectives were achieved. It’s funded by a specific $15 billion commitment by the federal government, its mandate being in line with current federal government objectives, especially on climate. 
The CF in contrast would be funded by the excess returns generated by the PSPF (and potentially the other funds managed by PSP) and therefore would not have any impact on Canada’s annual deficit or national debt. Its mandate would be to invest exclusively in Canada - the mandate and target return to be established but could be similar to the CGF but with a broader range of industry sectors. I would suggest that it have a focus on early to mid-stage Canadian companies that often have to look to the US or elsewhere for the capital required for the development of their IP and to move their business to the next level. 
The similarity of the two funds would be the governance structure wherein the federal government sets the mandate but is NOT in any way involved in the actual investing decisions, both funds to be managed by an independent investment manager. 
By having a long-term funding source that is independent of future government finances, the CF would be a permanent source of capital to promote strategic Canadian private sector investment.

Now, I like Neil's idea of setting up a Canada Fund to invest exclusively in Canada where the governance is exactly like the Canada Growth Fund, namely, it would operate at arm's length from the government which funds it and sets the mandate.

What are other possibilities? I've long argued we need to set up a Canada Healthcare Fund which has the same governance as PSP and CPP Investments with a clear mandate to invest and meet the growing healthcare expenditures of our growing population.

Since the feds handle healthcare expenditures, they can easily set up such a fund and grow it over time to make sure we have enough money to pay for growing healthcare costs as the population ages.

To be honest, this should have been done years ago, but we don't have much foresight when it comes to thinking long-term in this country.

Another idea for that C$9 billion surplus similar to my Canada Healthcare Fund is to start the Canada Disability Fund which is a fund that will pay benefits to Canadians living with a disability.

Why do we need a Canada Disability Fund? Simple, the recent passage of Bill C-22 creating the Canada Disability Benefit (CDB) isn't enough, the disability benefits fall short of what the government promised and we need to rectify this to take care of our most vulnerable citizens who have been living in poverty for far too long.

As I stated many times, if the Government of Canada handed out CERB payments of $2,000 a month to every eligible Canadian during the pandemic, then why are Canadians with disabilities expected to live on half that amount or less in 2024 after a significant rise in inflation. It's a travesty and they know it.

Again, our policymakers make political choices that suit their agenda but how about they start making intelligent choices that fix our healthcare and boost disability payments to those that need them?

Lastly, I enjoyed my conversation with Neil because he's a sharp guy with a lot of experience and it shows.

We discussed compensation at Canada's large pension funds and he told me that at PSP, they implemented a total fund compensation system where the vast majority of every employee's compensation is based on PSP's long-term results (only a small portion based on individual and team results). 

In this regard, PSP is ahead of its peers since their compensation is based a lot more on total fund results (have to verify this to see if there are important differences with other funds that also claim their comp is largely based on total fund long-term performance).

Neil told me the idea came at an offsite and there was "buy-in from all the investment teams." 

What else? Neil explained how platforms mean different things for private market asset classes:

• For real estate, you have joint ventures 50/50 splits with funds developing and acquiring properties
• In private equity, platforms are built on strategic relationships with PE fund to gain co-investments and reduce fee drag. The same goes in private credit.
  
• In infrastructure, you have operating companies owned by pension funds that buy toll roads, airports, ports, etc.

Neil told me given the reputation risks of owning platform companies in infrastructure that are sole operators of an asset, it might make sense for several large pension funds to invest together in the future and compete with the ever growing mega billion private equity infrastructure funds.

On separating alpha and beta, he gave Eduard van Geldren, the former CIO, all the credit for setting geographic diversification and then figuring out where it makes sense to go after alpha and where it makes sense to stick to beta.

For example, in fixed income, private credit has added important alpha but in Hong Kong, it makes more sense to have beta exposure through public markets and so on and so on.

Admittedly, I am oversimplifying here and I would prefer if Eduard wrote a nice research piece on how to properly separate alpha and beta a large pension fund since he did this successfully at PSP.

Alright, before I wrap this up, I did ask Neil if he'd be interested in running this Canada Fund he is proposing and he said he's retired now and might help them as part of the board but he's not interested in heading up this fund.

He's advising Sagard and enjoying that and enjoying retirement in the Eastern Townships.

I personally can't think of a better board member to have on a large pension fund board, he has tremendous experience and knowledge and can bridge existing gaps (you need someone like that on the board of CPP Investments or other Maple Eight funds, except PSP since he was the CEO there).

Alright, that's a wrap, time to grab some dinner and put my little guy to sleep.

I thank Neil Cunningham for another great conversation and sharing his thoughts on the surplus at the Public Service Pension Fund.

Below,I urge you to watch this clip on the hidden costs of Canadian healthcare. This video was made by McMaster University students Muskaan Natt, Ali Mohammad, Asiya Ali, and Jasiya Janjua in collaboration with the Demystifying Medicine McMaster Program.

And Canada is taking an important step towards launching a long-awaited national disability benefit. The new measure was unveiled in April when the federal budget was presented and payments are expected to begin at in July 2025.

The Liberals say the program is meant to help lift Canadians living with disabilities out of poverty, but as Global News' Mike Armstrong reports, critics say the funding isn’t even close to what’s needed. 

As I stated many times, a society shows its character by how it takes care of its most vulnerable citizens. In my opinion, we are failing in this regard and need to properly fund disability benefits to Canadians that need them. Same in healthcare, we are not planning for a better future.

Update: PSP's former CIO, Eduard van Gelderen, shared this with me after reading this comment:

Herewith a quick reaction on your "conversation with Neil" blog comment. I fully support Neil's suggestion and argumentation. 
Just shaving off the surplus above 125% to reduce the debt position is not particularly creative nor productive. 
But, there is another argument to make here. Over the years, CEOs like Gordon, Andre and Neil have created a professional and successful asset manager based on the principles of the Canadian model. The performance in the past has been significantly higher than the discount rate and this is likely to be the case going forward. Hence, the 'problem' of the non-permitted (excess) surplus will reoccur over and over again. 
There are three solutions:

1. Make sure that the surplus will never go beyond 125%. For example, by changing the risk profile and/or the asset mix. But, this has potentially serious negative implications for PSP as an asset manager. For example, it might mean downsizing the internal private markets investment teams. In essence, it breaks down what the previous CEOs carefully built up. 
2. Go the "Neil" route. Shave off any surplus >125% over time. You keep the organization intact and there is a clear incentive to continue to perform well. 
3. Create a formal off-balance pension plan for government employees and get rid of the non-permitted surplus rule. In this case the Canadian government cannot claim any surplus, but also doesn't need to cover a potential deficit. This forces them to come up with a clear risk-sharing protocol and a Board taking decisions and responsibilities (similar model as, for example, OTPP). Clearly, this implies that the members carry some of the risks too and is not put in place overnight.

The 'Neil' route is probably the best option to protect PSP as a professional investment organization.

I want to thank Eduard for sharing his suggestions with my readers and since he and his team were the liaison with Treasury Board Secretariat of Canada which oversees SP, he is well suited to comment on this issue.

Also, Alison Loat, Senior Managing Director, Investments at OPTrust shared this with me after reading this comment:

Very interesting set of ideas. On your disability idea, you might want to look at Australia's National Disability Insurance Scheme (NDIS), the assets of which are managed by the Future Fund (Australian government's wealth fund). Notably the Future Fund also manages a fund for medical research. It'd be great to have this kind of long-term thinking and programs in place in Canada, and appreciate the contribution you and Neil are making to the discussion.

Alison spent much of her career in Canadian public policy and long-term investing (and was on the founding team of FCLT). She told me "the discussion you’re stimulating is so so important." 

I thank her for sharing this with my readers and fully agree with her.

James Bradshaw of the Globe and Mail reports HOOPP names infrastructure expert Annesley Wallace as its next CEO:

The Healthcare of Ontario Pension Plan has named Annesley Wallace as its next chief executive officer, reaching outside the organization to choose a leader with expertise in infrastructure investing and strategy.

Ms. Wallace will join HOOPP on March 1 and work with outgoing CEO Jeff Wendling for a transition period, then take over on April 1, the pension fund announced Monday. Mr. Wendling, 64, said in September that he would retire next year after 26 years at HOOPP, including five as its CEO.

While Mr. Wendling started as a portfolio manager at HOOPP in 1998 and worked his way up, Ms. Wallace is a new face who brings experience both inside and outside of the pension sector to the largest pension plan serving Ontario health care workers. She spent 11 years at Ontario Municipal Employees Retirement System (OMERS), including stints as chief pension officer and then as global head of its $32-billion infrastructure division.

More recently, she spent the past two years as executive vice-president of strategy and corporate development at pipeline company TC Energy, where she is also president of the company’s s power generation and natural gas storage businesses. And she has been a board member at companies such as Bruce Power and the Toronto Region Board of Trade, as well as carbon capture startup Deep Sky, which was co-founded by entrepreneur Fred Lalonde.

“One of the many reasons I am excited about joining HOOPP is that the organization is uniquely positioned for success,” Ms. Wallace said in a statement. “HOOPP is a top-performing pension plan, operating as part of a defined benefit system that is admired globally.”

HOOPP invests on behalf of more than 460,000 working and retired members at more than 670 employers in Ontario’s health care sector, managing $113-billion for employees such as nurses and medical technicians. The pension fund earned an investment return of 9.38 per cent last year, overcoming a drag from losses on real estate investments, and has gained an average of 8.43 per cent annually over the past 10 years.

After Mr. Wendling steered HOOPP through the COVID-19 pandemic, Ms. Wallace will take over at a time when global pension fund managers face a different array of challenges. Though inflation has eased and interest rates have started to edge downward from peak levels earlier this year, markets have remained volatile and dealmaking has been sluggish, faced with potential trade disputes over tariffs and geopolitical tensions between the U.S. and China.

As stock markets have surged, driven largely by a small concentration of large technology companies fuelling the rapid race to develop artificial intelligence, pension funds have also seen their more diverse, risk-averse portfolios struggling to keep pace.

Politicians and business leaders have also debated whether Canada’s largest pension funds, which collectively manage more than $2.2-trillion, have enough of their assets in Canada, HOOPP has a peer-leading 55 per cent of its portfolio invested domestically. But Mr. Wendling pushed to give HOOPP more international investing clout, opening its first office outside of Canada, in London, while building up its investment team and giving more prominence to risk management.

When Ms. Wallace led the infrastructure division at OMERS, she helped build out the unit’s operations abroad, including in Australia and Singapore.

Mr. Wendling also kept HOOPP in a funding surplus throughout his time as CEO, with $1.15 for each dollar of pension benefits that the plan expects to owe to members, as of Dec. 31.

“We are building on an incredibly strong platform, owing to Jeff’s leadership and the strength of the team at HOOPP,” Ms. Wallace said.

Layan Odeh of Bloomberg also reports Ontario healthcare pension names Annesley Wallace CEO:

Healthcare of Ontario Pension Plan appointed Annesley Wallace, a former executive with Ontario Municipal Employees Retirement System, as its new president and chief executive officer. 

Wallace will begin working with outgoing CEO Jeff Wendling on March 1, 2025, before fully taking over on April 1, according to a statement Monday. 

“The search by our board for this critically important position was extensive and we met with numerous highly qualified candidates,” said Dan Anderson, chair of Hoopp’s Board of Trustees. “Annesley is our preferred candidate, and we know she is the right person to lead the organization.”

Wallace has been an executive vice president at TC Energy since May 2023. Prior to that, she spent several years at Omers, most recently overseeing the pension fund’s infrastructure arm. 

Hoopp serves more than 670 employers in Ontario’s hospital and community-based health care sector. Last year, the pension fund delivered a 9.4% return, bringing its net assets to C$112.6 billion ($80.2 billion).

Earlier today, HOOPP announced the appointment of Annesley Wallace as the new President & Chief Executive Officer (CEO), effective April 1, 2025

TORONTO (DECEMBER 2, 2024) – The Healthcare of Ontario Pension Plan (HOOPP) is pleased to announce the appointment of Annesley Wallace as the new President & Chief Executive Officer (CEO), effective April 1, 2025. Ms. Wallace will take over from Jeff Wendling, who announced his retirement in September and has served as CEO since 2020.

Ms. Wallace brings a track record of leadership across investment management and pension administration, and is well suited to further HOOPP’s mandate to deliver secure, lifelong pensions to Ontario’s healthcare workers.

Ms. Wallace is currently the Executive Vice President of Strategy and Corporate Development and President, Power and Energy Solutions at TC Energy. Her investment experience includes overseeing a $32 billion global infrastructure portfolio as Executive Vice President and Global Head of Infrastructure at OMERS, delivering risk-adjusted returns and providing strong, consistent performance and significant value for members. As Chief Pension Officer at OMERS, she led initiatives that enhanced member engagement, digital services, and the overall member experience for over 500,000 plan members.

In addition to her leadership roles at TC Energy and OMERS, Ms. Wallace has been appointed to numerous board positions, including Bruce Power, Toronto Region Board of Trade and Ontario Infrastructure and Lands Corporation.

Ms. Wallace said she is looking forward to working closely with HOOPP’s Board of Trustees and Executive Team to advance the organization’s objectives and foster transparent, collaborative leadership.

“One of the many reasons I am excited about joining HOOPP is that the organization is uniquely positioned for success,” said Ms. Wallace. “HOOPP is a top-performing pension plan, operating as part of a defined benefit system that is admired globally. It has an exceptionally strong purpose and talented people. It also has a very bright future, given its current funded status and scale, mandate in the healthcare sector and opportunities for growth across membership and employer groups.”

Dan Anderson, Chair of HOOPP’s Board of Trustees, said: “The search by our Board for this critically important position was extensive and we met with numerous highly qualified candidates. Annesley is our preferred candidate, and we know she is the right person to lead the organization and to continue our mission of providing retirement security to more than 460,000 healthcare workers in Ontario.”

As HOOPP continues its work to implement the 2025-29 Strategic Plan, Ms. Wallace will bring her collaborative leadership approach to advancing HOOPP’s goals.

“We are building on an incredibly strong platform, owing to Jeff’s leadership and the strength of the team at HOOPP,” said Ms. Wallace. “We will continue to build on HOOPP’s success by delivering the best value and experience in retirement for healthcare workers of Ontario.”

Ms. Wallace holds a Bachelor of Science and Master of Science in Engineering from Queen’s University, and a Master of Business Administration from the Schulich School of Business at York University.

Ms. Wallace will start work with Mr. Wendling on March 1, 2025, as part of a transition period before assuming the CEO duties on April 1.

“I look forward to working with Annesley during the transition period,” said Mr. Wendling. “We have so many great people in this organization. With Annesley’s leadership, and the vision of the Board, HOOPP is well positioned for continued success.”

Gerry Rocchi, HOOPP Board Vice Chair, thanked Mr. Wendling for his five years as CEO and 26 years with HOOPP.

“Jeff helped HOOPP solidify its place as one of the top-performing pension plans in the world and keep us fully funded through some of the most challenging market conditions in history,” Mr. Rocchi said.

About the Healthcare of Ontario Pension Plan

HOOPP serves Ontario’s hospital and community-based healthcare sector, with more than 670 participating employers. Its membership includes nurses, medical technicians, food services staff, housekeeping staff, and many others who provide valued healthcare services. In total, HOOPP has more than 460,000 active, deferred and retired members.

HOOPP operates as a private independent trust, and its Board of Trustees governs the Plan and Fund, focusing on HOOPP’s mission to deliver on our pension promise. The Board is made up of appointees from the Ontario Hospital Association (OHA) and four unions: the Ontario Nurses’ Association (ONA), the Canadian Union of Public Employees (CUPE), the Ontario Public Service Employees' Union (OPSEU), and the Service Employees International Union (SEIU). This governance model provides representation from both employers and members in support of the long-term interests of the Plan.

Alright, talk about big Monday news! Annesley Wallace, the former head of OMERS Infrastructure, named new CEO of HOOPP!

First, let me publicly congratulate her for this extremely important nomination.

I already did so on LinkedIn earlier today noting:

Huge news out: Annesley Wallace has been appointed the new CEO at HOOPP (Healthcare of Ontario Pension Plan). More to come later tonight but let me first publicly congratulate her on this big appointment, she's well placed to help HOOPP accelerate its infrastructure program and will work well with Michael Wissell to make that organization even better.

I should have said Michael and others because the truth is Annesley is going to be heading up one of the best pension plans in the country where there are highly experienced professionals across the investment, finance and other divisions.

And she knows it, noting his in the press release:

“One of the many reasons I am excited about joining HOOPP is that the organization is uniquely positioned for success,” said Ms. Wallace. “HOOPP is a top-performing pension plan, operating as part of a defined benefit system that is admired globally. It has an exceptionally strong purpose and talented people. It also has a very bright future, given its current funded status and scale, mandate in the healthcare sector and opportunities for growth across membership and employer groups.”

“We are building on an incredibly strong platform, owing to Jeff’s leadership and the strength of the team at HOOPP,” said Ms. Wallace. “We will continue to build on HOOPP’s success by delivering the best value and experience in retirement for healthcare workers of Ontario.”

The second people I want to publicly congratulate is HOOPP's board of directors led by Dan Anderson (Chair) and Gerry Rocchi (Vice Chair).

Why the Board? Because Jeff Wendling announced his retirement at the end of September when I had a great conversation with him.

The Board went straight to work, interviewing candidates and there were plenty of highly qualified internal and external ones, but in the end, they chose the best person for the organization and that was Annesley Wallace:

Dan Anderson, Chair of HOOPP’s Board of Trustees, said: “The search by our Board for this critically important position was extensive and we met with numerous highly qualified candidates. Annesley is our preferred candidate, and we know she is the right person to lead the organization and to continue our mission of providing retirement security to more than 460,000 healthcare workers in Ontario.”

And this was all done in two months, they didn't wait to announce in the new year, so I give them kudos for that, it's good for everyone --employees, members, peers etc. - to know who the new leader is before the new year starts.

Annesley will start working on March 1, 2025 alongside Jeff Wendling, as part of a transition period before assuming the CEO duties on April 1. 

A month isn't a lot of time to transition into CEO role but she's a sharp cookie and will learn fast. 

Now, why Annesley Wallace? Why did HOOPP's Board choose her?

I was surprised only because I thought Annesley left the Maple Eight for good and joined the private sector, but when I heard who they chose, everything came together.

Let me explain. Go back to read my comment from January 2021 when OMERS CEO Blake Hutcheson revamped his executive team where he placed Ralph Berg as Head of OMERS Capital Markets (Ralph is now CIO) and Annesley Wallace as Head of OMERS Infrastructure (Michael Hill is now the Head).

Blake shared this with me back then:

I highlighted Ralph Berg and Annesley Wallace because these are the the most important changes. Ralph Berg will be replacing Ken Miner, who has announced his retirement, effective April 1, 2021 after a "very distinguished career." Ralph Berg will be based in London.

Annesley Wallace, who has been leading the Pensions and Global Communications teams for the last three years, will return to Infrastructure to replace Ralph Berg as the Global Head of that group. She is based in Toronto.

Blake spoke very highly of both all his senior team and said he has the utmost trust in them. 

As far as the two big nominations, he told me "Ralph has a law degree, over 20 years banking experience, spent six years as Head of OMERS Infrastructure, speaks several languages and is an outstanding leader." 

"Annesley was named top 40 under 40 (she's only 39 years old), she has an MBA from York and an Engineering degree from Queen's University. She's super bright and great leader who is returning to Infrastructure investing."

It should be noted, both these people are outstanding leaders and surefire contenders to take over the top job in the future when Blake eventually steps down (not any time soon).

In July 2022, Annesley Wallace and Alastair Hall sat down with Infrastructure Investor’s Zak Bentley to talk about OMERS Infrastructure’s strategy, assets, growth, and third-party capital program. I covered that here and it's worth reading it all over again. 

So, you have a young female executive in her early 40s who once headed one of the best institutional infrastructure portfolios in the world and she really knows her stuff in that asset class which HOOPP is ramping up (Jim Keohane once admitted to me that OMERS has a great Infra portfolio).

Now, it's worth noting here that infrastructure is changing fast. I had discussions with Andrew Claerhout, OTPP's former head of Infrastructure and Natural Resources where I asked him what he thinks about all these mega big global infrastructure funds that have sprung up managing billions.

Andrew told me it's added competition and in the future Canada's Maple Eight might not be able to go it alone in infrastructure like in the past and will likely co-invest alongside the big funds like they do in private equity.

I also had an interesting discussion with Neil Cunningham last Friday and will discuss that tomorrow where we touched many aspects including compensation at large pension funds and how platforms mean different things for different private market asset classes. In infrastructure in particular, where you own and operate toll roads, airports via platform companies, you assume all the operating risk and that introduces risks to the pension funds.

In response to the mega infrastructure funds sprouting up (it used to only be Brookfield, GIP anda few others and now there are many mega funds), Neil said he wouldn't be surprised if Maple Eight funds partner together to create operating companies to compete.

I'm trying to connect the dots for you as to the new environment Annesley Wallace and others are facing and how they will respond.

Annesley has great institutional contacts and I can tell you her former boss at OMERS thinks very highly of her.

In fact, I wouldn't be surprised if Blake spoke to HOOPP's Board and highly recommended her (he's the type to do so).

Obviously, I don't know for sure, but I remember when Annesley Wallace departed the organization soon after Ralph Berg became CIO, Blake had privately told me that sometimes when two highly qualified candidates are competing for the top job, it's very tough if one doesn't see a path leading to it.

Well, fast forward to today, Annesley Wallace just got the top job at HOOPP and she will undoubtedly work with OMERS and others to build up HOOPP's infrastructure portfolio.

Again, HOOPP's Board chose her for a reason, they didn't want another Jeff Wendling or Jim Keohane at this stage of HOOPP's growth and I totally get it.

Jim and Jeff did a great job building up HOOPP's capabilities especially on asset-liability and return seeking portfolios and they trained a lot of talent there which will continue this outstanding work.

Annesley isn't going to mess with that, she knows how important it is for HOOPP to remain fully funded and will focus her attention where she can add value to the organization. 

She will also carry out the important work Jim and Jeff did on advocacy and given she was OMERS' Chief Pension Officer at one time, I have no doubt she will do a great job there too.

Importantly, Annesley knows the value of a good pension, she knows she has important responsibilities and big shoes to fill after Jim Keohane and Jeff Wendling and most importantly, she knows that ultimately, it's all about HOOPP's members in the Ontario healthcare sector.

Lastly, I know some naysayers will scoff that she got this top job because she's a woman and I will answer to them she got the job in spite of being a woman and in spite of her relatively young age.

Don't forget, most of HOOPP's members are women and her age is actually a big positive because she can easily commit the next 10 to 15 years to HOOPP and really make a huge difference. 

Annesley now joins an elite group of pension fund CEOs in Canada and she is the third woman to head up a major pension plan/ fund after Deb Orida (PSP's CEO) and Barb Zvan (UPP's CEO).

Can women do as good a job as men or even better in these top positions? Of course they can, why not?

But it is true that it's lonely at the top (no matter your gender) and my best advice for Annesley is to take some time off before starting at HOOPP in March and hitting the ground running.

I'd also advise her to talk to current and former CEOs of the Maple Eight and get their best advice as she thinks how she wants to proceed.

Anyway, Annesley knows all this, I expect her to map out her strategy within a year of being CEO and it will be my pleasure to talk to her when the time is right (I'll even share some of my wisdom as I'm not as dumb as I look!).

Alright, let me wrap it up there and once again wish Annesley Wallace congratulations for being nominated the new CEO of HOOPP and wish her and everyone there a lot of success.

Below, Wall Street Week discusses how infrastructure has evolved from a predominantly public investment to a partnership between the public and private sectors. They talk to Perella Weinberg Vice Chairman Robert Steel, BlackRock Chairman & Larry Fink, Global Infrastructure Partners Co-Founder Adebayo Ogunlesi, RockCreek CEO Afsaneh Beschloss, "Chip War" Author Chris Miller, and Rockefeller Foundation President Dr. Rajiv Shah about the role of infrastructure investing in the energy transition and global net-zero commitments.

Also, IFM Investors chief strategy officer Luba Nikulina joins Yahoo Wealth! to share advice on infrastructure investing for individual investors.

Hugo Joncas and Julien Arsenault of La Presse report the Caisse's trusted man at the heart of the corruption plot (translated from French):

In September 2021, Azure Power  – which received more than $600 million from Quebecers – announced the arrival of Alan Rosling as chairman of its board of directors. The Indian company emphasized that he was appointed by the Caisse, its controlling shareholder. Considered an accomplished businessman and pioneer of climate finance in India, he was in principle responsible for ensuring the good governance of the organization.

According to the American stock market watchdog, Rosling instead participated in the plot to pay some US $250 million in bribes to representatives of Indian states. He would have acted in concert with Azure's main rival, the Adani group, whose founder, Gautam Adani, 27th richest person in the world according to Forbes, is close to Indian Prime Minister, Narendra Modi.

For the nest egg of Quebecers, this story of corruption is added to a series of disasters having undermined its bet in Azure, which is today worth less than 5% of the value of the initial investment. The American authorities are interested in the matter because Azure's shares were traded on the New York Stock Exchange, before being delisted in July 2023.

A New York prosecutor unveiled, on November 20, a series of criminal charges against eight people, including three former executives of the Caisse and two former CEOs of Azure whom they had put in place.

Mr. Rosling is not one of them, but he nevertheless finds himself implicated in this matter, according to a civil complaint from the Securities and Exchange Commission (SEC). The document primarily targets the former vice-president, infrastructure for Asia-Pacific, at the Caisse, Cyril Cabanes.

In the first months of his mandate, Rosling had no significant role to play in suspicious contracts or in discussions with Adani, according to the American stock market watchdog. “That changed in spring 2022,” however, underlines his complaint.

On April 29 of that year, Rosling attended a meeting with the head of its competitor, the Adani group. On this occasion, “the complete list of bribes promised or paid to representatives of Indian states was read aloud to him,” mentions the SEC.

These payments were intended to convince authorities to sign contracts to buy 12,000 megawatts of solar electricity. A third of them were to go to Azure. The Adani family had already committed to paying all of the bribes to corrupt Indian representatives, as part of a market sharing agreement.

During the meeting with Rosling, “Gautam Adani sought to collect Azure’s share of the bribes, which amounted to tens of millions of dollars,” specifies the SEC.

He is considering “a feasible transaction”

Far from sounding the alarm, Rosling instead put his hands to work to find a way to conclude “a feasible transaction”, in the words that the vice-president of the Caisse Cyril Cabanes would have used.

While an internal investigation was in full swing in the summer of 2022 into potential embezzlement at Azure, Rosling and Cabanes “took steps to hide information about the bribes from executives at Azure and the company. Fund,” the SEC wrote.

The organization specifies that Rosling and Cabanes would have “agreed with other people at the Caisse and at Azure to agree on a false story”. They even allegedly lied to internal investigators and Azure lawyers.

Instead of paying its share in cash, Azure ultimately transferred its largest solar farm contract to Adani in 2023 under a false motive, says the SEC. “The resulting transaction resulted in a significant transfer of value from Azure to Adani."

Investigations launched in India finally got the better of the last contract that Azure had kept.

The company suddenly announced Rosling's resignation on October 12, 2023, an effective departure the day before the announcement. The statement did not mention any thanks for his services or the reasons for his ejection.

“More than shocking”

Former analyst at the Caisse and author of the Pension Pulse blog on pension plans, Leo Kolivakis said he was stunned by the content of the SEC complaint.

“It’s more than shocking,” he wrote on his blog. "You just can't make this stuff up. It should be made into a Hollywood blockbuster because it’s so serious."

Radio silence at the Caisse

Since the opening of its office in New Delhi in 2016, the Fund has bet 9 billion on India. Its three former executives accused of corruption were all employees of the Quebec institution in this region of the globe between 2018 and 2023.

How many investment cases have they been involved in? Has the Caisse established a process to ensure that its three former executives accused of criminal offenses have not committed other acts of embezzlement over these years?

Impossible to know. Despite requests from La Presse, the Caisse refuses to offer details.

“We are committed to the highest standards of ethics and compliance and no compromise is made on these issues,” its spokesperson, Jean-Benoît Houde, wrote in an email. We are talking here about three isolated cases, which concern individuals dismissed more than a year ago."

Difficult to comment without additional information, judge Nicola Bonucci, associate professor at Paris Cité University and former director of legal affairs at the Organization for Economic Co-operation and Development (OECD). In this capacity, he monitored the application of the Anti-Corruption Convention in member countries.

“In absolute terms, the question that arises is whether the people in question acted autonomously or with the at least tacit consent of management,” he says.

He adds that if executives were able to act by circumventing internal compliance controls, “this should lead the company to question the effectiveness of its programs.”

I was going to take advantage of the long weekend in the United States to take some time off but this article came out early this morning.

First, Julien Arsenault of La Presse did reach out to me and asked me if I was aware of Alan Rosling and his role in the bribing scandal, citing this passage from the SEC complaint against former CDPQ executive Cyril Sebastien Dominique Cabanes:

 In particular this part:

On September 30, 2021, CDPQ, with Cabanes participating, appointed the Azure
Chairman as Chairman of Azure’s Board of Directors. The Azure Chairman had had no
substantive involvement with the contract awards for the Manufacturing Linked Projects, or with any discussions or negotiations involving any Adani Green officials. That changed in spring 2022.

I told Julien I didn't know Alan Rosling but referred him to my recent blog comment and said there are many unanswered questions here and there needs to be accountability at the CDPQ.

However, I also mentioned several times there is an ongoing investigation so we don't know if others are involved.

In the article, CDPQ spokesperson Jean-Benoît Houde, wrote in an email: 

“We are committed to the highest standards of ethics and compliance and no compromise is made on these issues. We are talking here about three isolated cases, which concern individuals dismissed more than a year ago."

Well, those "highest highest standards of ethics and compliance" proved completely worthless in this massive bribing scandal.

CDPQ has a Policy on Fraud and Corruption Prevention and Detection which you can view here and it was last updated in October 2020.

I note this part:

Clearly Cyril Cabanes and his co-conspirators at CDPQ didn't read this policy or worse still, did read it and couldn't care less and went ahead with this brazen scheme to bribe Indian government officials.

When I posted my comment on CDPQ Rocked by Major Indian Bribery Scheme on LinkedIn, Adriana Arrillaga, President and Portfolio Manager at One Summit Capital Wealth Management shared this in a comment:

“According to a recent study by Transparency International – a Berlin-based NGO working against corruption, India is the ‘Most Corrupt Country in Asia-Pacific Region’, and seven out of 10 people in India, pay a bribe to access public services. Ever since India received its independence, several corruption scandals have broken out in the country causing crores of loss to the central and state governments. Here’s a look at most infamous corruption scandals of India.”

One contact of mine who is a director on a board told me he wasn't shocked:

 India is very corrupt, all these emerging markets are so doing business in India, Indonesia and other emerging markets adds reputation risk to Canada's large pension funds, a lot more than doing business in the US, UK, Australia or other countries where bribes and corruption aren't rampant.

He added:

This scandal stinks, you have to wonder who else knew about it at CDPQ and if there was pressure to obtain performance and look the other way. Keep in mind, it was a whistle-blower who went to the SEC, not CDPQ, to tell them about these alleged bribes. CDPQ senior execs were caught with their pants down. And to be honest, I wouldn't be surprised if similar bribing schemes are also occurring at other CDPQ subsidiaries in India and at those of other large Canadian pension funds.

He raises several important points there. Who exactly reported this to the SEC? Are there other people at CDPQ currently being investigated? Was there pressure to perform in India and did they knowingly look the other way as all this unfolded?

Moreover, this person found it odd that neither CDPQ's senior management or its board of directors released a public statement stating they have launched their own internal investigation and findings will be presented very soon.

I told him it's not odd when you consider the US investigation is still going on and all CDPQ's internal and external legal counsels are telling them to stay quiet.

But in his email, CDPQ spokesperson Jean-Benoît Houde, wrote: "We are talking here about three isolated cases, which concern individuals dismissed more than a year ago."

Three isolated cases? If that's truly the case, then why not release a public statement on this scandal and launch an internal review where findings are made public?

Something doesn't add up here and I'm not surprised politicians are circling around this case, demanding answers:

Here is the translation:

 "I expect an explanation from the Minister of Finance on these actions by the CDPQ. Quebecers must have all the information and those responsible must be punished. It is our reputation and credibility that is damaged by this terrible story."

What do you think Quebec's Minister of Finance will do? He'll end up bringing CEO Charles Emond to Quebec City where he will be grilled hard on this scandal involving alleged bribes to foreign government officials.

And let me be even more blunt, if CDPQ sticks to the "three isolated cases" line, they're going to be crucified, literally crucified.

Here are a list of tough questions that need to be answered:

• Who hired Cyril Cabanes, who did he report to initially and who did he report to while these alleged activities took place?
• When did CDPQ get contacted by the FBI, SEC and US Department of Justice that there was an ongoing investigation into alleged bribes? How did CDPQ respond? Did it immediately launch an internal investigation and if it did, will the findings be released? What are the internal policies to mitigate fraud like this? Why didn't they work?
• When did CDPQ dismiss former executives Cyril Cabanes, Deepak Malhotra and Saurabh Agarwal for their participation in an alleged bribery scheme involving Indian conglomerate Adani Group? When did they dismiss Alan Rosling? Were they given severance packages to sign non-disclosure agreements?
• Why did Anita George leave CDPQ after heading up operations in India? What role if any did she play in all this?
  
• Does CDPQ have any issues with other subsidiaries in India? Given what happened at Azure, were independent experts brought in to evaluate activities at other subsidiaries and if so, what were their findings? (for example, were there similar bribe cases? What is the turnover at all Indian subsidiaries and in what departments? Is corruption systemic and widespread?)
  

I can go on and on as it was my job at CDPQ to grill external hedge funds on investment and operational risks but these are critical questions that need to be answered.

And if CDPQ and its Board do not provide a comprehensive review and solid answers, Quebec's government should launch its own probe, bringing in its independent experts to review how and why this happened.

That's how serious this case is and to dismiss it as "three isolated incidents" is literally to sweep it under the table.

Now, some people have told me that you need to accept some shady things will occur if you're going to do business in India and take part in its great economic transformation there, but my answer is at what cost, the entire reputation and credibility of your pension fund is at stake.

And here we are talking about senior executives who took part in a mastermind plot to bribe Indian government officials to get better contract terms for their solar project. 

It can't get any more serious than that.

Lastly, I am aware that bribes can happen anywhere, including here in Canada across all asset classes.

When I was working at the CDPQ back in 2002, I visited the offices of Norshield Financial here in Montreal and it took me 20 minutes to figure out it was a Ponzi scheme and as I was leaving its shady founder approached me and said: "Is there any way to facilitate an allocation?".

I said: "Sure, come to CDPQ and ask my investment committee, you should be ashamed of yourself."

He had greased pension fund managers in Laval and Sherbrooke to invest in his fund of funds (it wasn't even that) and I wasn't shocked when his firm collapsed.

So, yes, bribes can happen here but in a country like India where corruption is widespread, you really need to be on guard and have everything checked out three times by many eyes in your finance department.

What else? OMERS is a minority shareholder of Azure and as far as I can tell, nobody there was involved in this scheme and they must be very uneasy with what has transpired.

Again, this is the most serious bribing scandal involving a global pension fund and unfortunately it involves former executives at CDPQ's Asia-Pacific operations.

One former employee of CDPQ told me flat out "the board and management are extremely weak" and when I asked why, the response was there has "been unusually high turnover at certain levels at CDPQ and the board is made up of people that aren't qualified to oversee CDPQ."

Senior executives at CDPQ have a solid reputation so that surprised me and as far as the board of directors, they look fine to me but I do not know them intimately and cannot judge their qualifications.

I am surprised they haven't come out with a statement on this matter but as I said above, if the investigation is ongoing, the lawyers take control and muzzle everyone.

Alright, I wanted to take US Thanksgiving weekend off but this article couldn't be ignored.

Is this the end of this scandal or is there more to come? I have no idea, I hope not for CDPQ and its members.

As far as the rest of the large pension funds with huge operations in India, I wouldn't be surprised if they are all revising their fraud policies and making sure nothing like this ever occurs at their pension fund.

Below, India’s Gautam Adani, one of the world’s richest men, was charged last week by US prosecutors over his alleged involvement in a $250 million bribery scheme. The indictment sent the stocks and bonds of Adani’s vast conglomerate tumbling and is the second governance crisis to hit the group in two years.

On today’s Big Take Asia Podcast, host K. Oanh Ha and Bloomberg’s Menaka Doshi discuss what the charges mean for Adani’s empire and corporate India, and the implications for US-India relations.

Also Reuters reports that with $31 billion debt, deep links to the banking system and a star role in India's energy transition, Adani's empire is a crucial part of the country. In this week’s Viewsroom debate Breakingviews columnists look at how US bribery charges will test his role (great discussion).

Lastly, India Today TV decodes the Adani indictment and looks into whether there should be a probe In India. What a mess! 

Update: The former CDPQ employee expanded on the weakness of CDPQ's board and management:

The board is weak because no board member has ever invested professionally. If you have never done the job, you will miss a lot of the red flags. Same for the management team, almost no investment experience prior to CDPQ, mostly bankers who never owned their positions. Investing professionally is harder than it seems. CDPQ should not be the place where you learn by trial and error.

This is weak. Have a good read on CPP Investments' management and board prior experience. They have amazing expertise. For me, given the size and complexity of CDPQ, there's not enough hands on investment experience at the board and management level. 

Investment experience is defined in the document on the governance competency for the board on CDPQ's web site. According to this definition, none of the board members have it.

I remarked that unions have (minority) board representation on CDPQ's board and that has pros and cons but it is their money and they want a seat at the board table. 

I also note that even if  board members don't have direct investment experience, they are highly qualified professionals with diverse experience.

As far as CDPQ's management team, some have more direct investing experience than others but let's not forget that Michael Sabia who was Charles Emond's predecessor had zero investment experience and still managed to do a great job for the eleven years he was at the helm of CDPQ (Michael was brought in to clean up shop and he knew how to surround himself with highly qualified and ethical people. And to be completely honest, he rode the bull market up and never had to deal with a major financial crisis, something I told him to his face at a private party and he agreed).

To be fair, REM is Michael Sabia's baby, an incredibly gutsy project that will bolster Montreal's public transit for decades to come. 

The former CDPQ employee stated this:

Maybe, but the risk/return (of the REM) is not worth it for the depositors. I think that if you ask Charles, he is probably not happy about all the crap he has to deal with because of Michael’s guiltiness, including the REM, India, and other investments in Europe and South America.

I responded:

REM is going to turn out to be a great investment for Quebec over long run, I’m sure of this (over 30 years) and it’s the envy of North American cities who only wish they had it. Is it perfect? God no! And yes, Charles did inherit lots of problems which is why it’s important to have a probe into this India scandal and see who is really responsible.

The former CDPQ employee strongly agreed (REM over long run and probe).

What else? It's also worth noting that CDPQ is similar to AIMCo and BCI in that it has many clients to answer to and they need to manage these relationships carefully along with that of the government.

CPP Investments has Canadians contributing to the Fund as clients but no direct group of clients (they are lucky in that sense). It is the biggest and most important pension fund in Canada so I expect them to have a very competent and experienced board and management team and the truth is they lead by example.

Lastly, an astute former pension fund manager and current private equity manager notes:

Honestly this is making more out of things than is really required. The bigger issue and solution is get out of India, and other corrupt countries. The fact that this makes the indirect case for investing more in Canada would also suit the theme of the times.
This assumes that there is not some sort of pervasive corruption culture in CDPQ. Not likely but certainly not something to be ruled out either. So some further due diligence is required, but guilty until proven innocent puts too much stock in the quality and credibility of US investigators as well. The SEC are very tactical about who they go after. So there is probably more of a story there as well.

I thank him for sharing his comments.

Update #2: Over the weekend, the Adani Group went on the offensive, claiming only CDPQ execs were indicted:

The corruption matter only applies to Azure Power and CDPQ executives, according to the Adani Group.

"Count one of the indictments, which refers to the corruption and bribery charges, only involves Ranjit Gupta, Cyril Cabanes, Saurabh Agarwal, Deepak Malhotra, and Rupesh Agarwal of Azure Power and CDPQ (Caisse de depot et placement du Quebec-a Canadian institutional investor and Azure's largest shareholder). No Adani official has been named by DoJ under this," said AGEL.

Looks like Adani is waiting for President Trump to take over and thus denying and deflecting blame.

In other news, Adani Green Energy Ltd. will consider resurrecting its scrapped dollar bond between April and June, Group Chief Financial Officer Jugeshinder Singh said Friday, in a show of the conglomerate’s resilience despite the US probe against founder Gautam Adani.

John Graham, President and CEO of CPP Investments, recently penned an article for the National Post on what gen Z needs to know about the Canada Pension Plan:

This message is for gen Z. If you’re not gen Z, I hope you’ll keep reading anyway.

As we mark Financial Literacy Month, I know many of you are feeling anxious about money. In fact, we’ve heard that over two-thirds of gen Z worry about making the wrong financial decisions and about the same number are concerned they will run out of money in retirement. It’s understandable — student loans, rent, house prices and the rising cost of living are a lot to manage at any age. At this point in your life, investing money systematically for retirement probably seems out of reach. Fortunately, if you’re part of the Canada Pension Plan (CPP), you’re already doing just that.

Here’s how the Canadian pension promise works: Every month, a small part of your pay goes into the CPP, matched by your employer. The amount not needed to pay current retirees is entrusted to the team at CPP Investments, where we focus solely on growing it for your retirement. When you’re ready to retire, you’ll receive a deposit in your bank account every month for as long as you live — adjusted for inflation to help ensure your financial security.

This year, we’re marking the 25th anniversary of CPP Investments. We started with $12 million; today, the CPP Fund stands at over $646 billion. Of that, $432 billion, after all costs, has come from the investment income we’ve generated on top of your contributions. Our mission is simple: While you’re building your life, education, career and family, we’re behind the scenes, quietly helping to grow and protect your retirement savings.

For your generation, the CPP will be especially important. People are living longer, and many of you might not retire in your 60s like past generations. You have more flexibility than ever before, as you’re expected to live to 100 and beyond. You may even choose to collect from the CPP while continuing to work, or while living abroad in retirement. Living your latter years differently — and on your own terms — has never been more possible. And the CPP will be essential in helping you do it.

With an annualized return of nine per cent over the past 10 years, we’re recognized as one of the best in the world at what we do. One reason for that is we’ve only ever had one goal: to produce stable returns that help pay pensions for Canadians. In a world where companies are preoccupied with day-to-day considerations, we stay laser focused on our singular purpose. We have no other choice; before we started to manage the CPP Fund, Canada’s senior poverty rate was among the highest in the world. Today, it is among the lowest.

We’re ready for the next generation. At 25 years old, CPP Investments is part of gen Z. Like you, we’ve grown up in an era of financial crises, inflationary cycles and even a global pandemic. And, like you, we’ve faced these challenges head-on.

But here’s the reality: Long-term investing is harder today than ever before. The world we live in now is more complex and unpredictable than it was even a decade ago. Markets today are increasingly rewarding short-termism, prioritizing quick wins over the long-term. However, we believe prioritizing growth through globally diversified investments and prudently managing risks will be required to meet retirement needs decades in the future.

What does this mean for you? At CPP Investments, we navigate these investment complexities alongside you, helping to keep one of your sources of retirement income safe. We continuously adapt our strategies, seize opportunities and manage risks — such as climate change and geopolitical risk — across a wide range of considerations, sectors and regions. Our priority is ensuring that our returns help provide pensions not just today, but for generations to come. We’re not chasing big wins or risking big losses — we focus on delivering steady, reliable returns you can count on.

So, this Financial Literacy Month, I’d encourage you to take two small steps. First, learn more about how the CPP fits into your financial future. You don’t have to figure everything out today, but understanding this piece can help reduce your financial stress and give you confidence to plan for the future. Second, take pride in the fact that, with every pay day, your retirement security is already being built.

For the two most important members of gen Z in my life — my kids — retirement will likely look very different from mine, but one thing remains certain: The Canadian pension promise will be there for us all.

Great article from John toward his kids and gen Z.

Most kids their age do not think of retirement or the Canada Pension Plan but with enhanced CPP, it's true that the Canada Pension Plan will become a lot more important to future generations in ensuring their retirement security. 

Now, some basics. Every Canadian that works or is self-employed contributes to the Canada Pension Plan.

Those contributions are professionally managed by the professionals at CPP Investments, Canada's pension fund which pools investment and longevity risk and ensures there are more than enough assets to meet long-dated liabilities (Chief Actuary of Canada makes sure of that by reporting on this every three years).

The folks at CPP Investments are investing across public and private markets all over the world and with the best hedge funds all over the world.

Joe and Jane Retail Investor in Canada can't do that, they can only invest in stocks, bonds, ETFs through savings vehicles like RRSPs and TFSAs.

Now, I went to lunch earlier with some friends I haven't seen in a long time but we chat on our chat group daily. 

We were discussing the best strategies for young kids starting to work and we agreed that RRSPs are a scam unless you're making big bucks and even if you are, at one point, you should stop contributing to them (or risk getting a whopper of a tax bill later on).

We said the best thing for young kids is to try to contribute as much as possible to their TFSA and start by investing the SPY ETF (S&P 500) or Nasdaq ETF (QQQ) and build up some savings.

The problem? Even if a young professional is making $80,000 a year, after paying rent, food, clothes and outings, there isn't much money left over to save so that TFSA limit of $7,000 in 2025 is almost impossible to achieve unless dad and mom help them save. 

And again, saving money is tough enough, it's a lot tougher to earn investment returns which is why I suggest young people just invest in the S&P 500 ETF or a balanced fund if they want less risk (but when you're young, take risk as compound interest will help you over many years).

Why the S&P 500 and not the TSX? Because my bias is to always have your money in US dollars as you will come out ahead over the long run and the US stock market will always remain the deepest, most liquid and most diverse market in the world (with episodes of concentration risk like now).

CPP Investments is most exposed to US assets precisely for that reason but being Canada's pension fund, they also have Canadian investments.

What else? Teach your kids early about working hard, saving hard and playing hard (they need to enjoy life too) and teach them how to trade properly.

I'm not going to get into a deep discussion here but know this, almost all books on technical analysis and making money in the stock market are utter garbage!

It took me years to figure things out and still learning every day but trends tend to persist which is why it's better to look at weekly moving averages and MACDs than daily ones or minute charts.

For example, Nvidia's daily chart is a little bearish as price fell below its 50-day moving average:

But if you look at the 5-year weekly chart, price remains above its 20-week exponential moving average and weekly MACD over zero so it tells me to stay long as the trend remains intact:

Also, experienced money managers know we are entering year-end where everyone chases this year's winners to make their portfolios look better (FOMO season).

What else? You also need to understand the macro environment but not everyone agrees on this.

My friend quoted famous fund manager Peter Lynch at lunch: "If you spend 13 minutes a year on economics, you've wasted 10 minutes."

[Another good one by him: “Make your business so easy to run that it could be run by an idiot. Because eventually it will be.”]

Well, with all due respect to Lynch, Stanley Druckenmiller who boasts the best long-term track record in the money management business understands macro very well, so I tell young students of the market to understand their macro (I'll plug Trahan's Macro Specialist Designation here).

What does macro mean? Where are interest rates? Where are they heading? Why? How does inflation and labour markets figure into this? What about credit markets? How are they influenced? What is the role of monetary and fiscal policy in determining financial conditions? What about housing and the business cycle? And so on.

Admittedly, understanding macro isn't easy and even top experts like Druckenmiller have a hard time sometimes figuring it out but it's essential and adds to your risk toolkit.

Anyway, I'm getting way ahead of myself but I love two things: the US stock market and macro markets and in that order! 

I can literally talk markets all day and can now hear my wife's voice in my head: "Get a life!"

But in all honesty, I can't wait for junior to turn 16 so I can start teaching him some basics.

Below, at this year’s Toronto Global Forum, John Graham, President & CEO of CPP Investments had a wide-ranging conversation with Goldy Hyder, President & CEO of the Business Council of Canada. The Forum is a platform for thought leaders to explore environmental and economic resilience, with a focus on fostering partnerships, encouraging investment opportunities, and inspiring future collaboration.

For John, navigating change is what makes his work interesting and engaging. He discussed CPP Investments’ journey to becoming one of the world’s top-performing pension funds, driven by a laser focus on its mandate, a conviction in investing for the long term, and a determination to resist FOMO (fear of missing out). A key takeaway: Finance is about investing in a system that is constantly in flux. It requires both quantitative and qualitative methods, art, and some science.

Listen to the full podcast here to learn more about John’s approach as leader of CPP Investments. I also embedded it below. 

Moreover, i embedded Peter Lynch's wisdom on investing in stocks (buy your kids his classic, One Up On Wall Street) and a recent interview with Stanley Druckenmiller which is a must watch (interviewed by Nicolai Tangen, CEO of NBIM).

I wish all Americans a great Thanksgiving and will be back next week.

Charles Mathieu of Le Journal de Montréal reports that nothing is going well in Ottawa: 10 federal civil servants make more than $2 million (translated from French):

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.

Charles Daly, Eyk Henning, Chunying Zhang and Wilfried Eckl-Dorna of Bloomberg report Northvolt collapse countdown started with BMW order cancellation:

For Northvolt AB, the Swedish startup that became a poster child for Europe’s electric-driving future, the route to collapse started in June when BMW AG cancelled a multi-billion-dollar order:

Back then, few saw the significance of the move, which effectively started a countdown that would culminate in a Chapter 11 filing less than six months later. Northvolt scrambled to keep the financing flowing, but as Germany’s car industry fell deeper into its own crisis, it became clear orders would dry up.

The company responded to the lost revenue by retrenching expansion plans and slashing jobs. By the time the last attempt at an emergency plan failed, investors who had poured in US$10 billion discovered only US$30 million cash was left.

Northvolt’s filing for bankruptcy protection in the United States, announced Thursday, marks one of the highest-profile setbacks for European industry against cheaper and nimbler Chinese and South Korean competition. The following day, co-founder and chief executive Peter Carlsson, who only a year ago had been trumpeting Northvolt as a possible initial public offering (IPO) candidate, resigned and warned the European Union risks falling behind on green projects.

The company needs as much as US$1.2 billion to finance its new business plan, Carlsson said, telling reporters that “we’ll regret it in 20 years if we’re not driving transition” to clean technologies.

In addition to BMW and Volkswagen AG, Northvolt’s top investors included Goldman Sachs’s asset management arm, Denmark’s biggest pension fund ATP, Baillie Gifford & Co. funds and a number of Swedish entities.

The Financial Times reported on Saturday that funds run by Goldman Sachs Asset Management are set to write down almost US$900 million at the end of the year. The investment was a minority one “through highly diversified funds,” Goldman said in an emailed statement, adding that its portfolios “have concentration limits to mitigate risks.”

One fund representative, who asked not to be named discussing private matters, said they were shocked at the speed with which Northvolt blew through its billions. As recently as July, the investor was confident of getting a return, but that changed in early August after getting a call from one of Northvolt’s owners, who warned that the battery maker could run out of cash by September.

The scale of the delays, and how bad things were with building budgets and construction projects remained hidden, the investor said, recounting how excel models and slide decks were used to conceal how empty the coffers had become.

The Swedish company now faces a task of restructuring, with a more focused operation set to emerge from the Chapter 11 process.

“A dilemma that these ambitious newcomers are facing is that from the get-go, they had to announce very large-scale plans in order to be attractive for financiers,” said Robert Heiler, senior manager at Porsche Consulting, part of the sportscar unit of Volkswagen, Northvolt’s top investor. “But it’s really difficult to scale up” various operations “all at the same time,” he said.

Just how badly Northvolt and its financiers misjudged the situation a year ago has now become evident. Last fall, the company invited investment banks to pitch for roles in an IPO that could have valued the battery maker at US$20 billion, the FT then reported.

A little over six months later, the IPO was pushed back from 2024, Bloomberg reported. Soon after that, VW’s truck unit, Scania, complained after Northvolt had trouble ramping up production volumes, and then BMW pulled its €2 billion (US$2.1 billion) contract to equip electric vehicles such as the i4 sedan and iX sports utility vehicle.

After repeated delays, the battery maker was unlikely to be able to produce the volumes BMW needed before 2026 — a year after predecessor models were set to be gradually phased out and almost three years after the original target date, a person familiar with the matter said, declining to be named discussing private information.

Around that time, a failure to close on an equity funding round meant that a US$5 billion green loan that was announced in January remained frozen, according to another person.

Even then, there was a chance for Northvolt to continue with plans for new battery plants in Germany, Sweden and Canada. In late June, Volkswagen — which owns 23 per cent of Northvolt — was prepared to step in, this person said. A representative for VW declined to comment.

But the German auto giant was facing a crisis of its own. By late summer, with EV sales stagnant in Europe and its lucrative Chinese business flagging, VW called for unprecedented factory closures in Germany.

Against the backdrop of potentially tens of thousands of layoffs at VW, Northvolt funding was off the table, and in August, VW withdrew from the equity plan, the person said. A Volkswagen representative declined to comment.

The German automaker, which had valued its Northvolt holding at the equivalent of more than US$730 million as of the end of 2023, then balked at committing to more battery purchases, people familiar with the matter said this month.

Still, work on a bridge funding deal continued, with an agreement coming close to fruition as recently as October. The US$300 million in emergency aid would have involved lenders, creditors and customers, but talks fell short.

“In this latest funding round, VW basically told us that they are not able to continue to capitalize us,” Carlsson said on Friday.

Northvolt’s debts include a US$330 million convertible loan from Volkswagen that’s due in December 2025, according to the bankruptcy court filing.

In its bid to reassure financiers, Northvolt nixed a planned expansion of its main plant in Skelleftea in northern Sweden and, in October, replaced the factory’s manager. But Carlsson acknowledges that he acted too slowly.

“I should have probably pulled the brake earlier on some of the expansion paths,” he said.

Northvolt’s big-swing approach will be second-guessed for years to come. But it won’t disappear in the immediate future. In its filing, the company said finding a strategic or financial partner is an overarching goal as it seeks to restructure the balance sheet and continue operations.

Governments — from Stockholm to Berlin — have rebuffed suggestions they’d spend taxpayer funds on a rescue.

German Economy Minister Robert Habeck, who had in June suggested Northvolt should build a second factory in his home country, on Saturday told German press agency DPA that he’s “cautiously optimistic” about the company’s future.

The relationship with Volkswagen continues. Scania CV AB remains a key Northvolt customer and will provide US$100 million in debtor-in-possession financing at a hefty interest rate of 16 per cent. Northvolt will also have access to about US$145 million in cash collateral. Battery plants under construction in Germany and Canada were left out of the bankruptcy, though the company said these projects will be postponed.

Northvolt is also making preparations in case it fails to raise funds for the future. Documents filed with the U.S. court show that it plans to “assess potential opportunities for a sale of some or all assets and has engaged Hilco Global to assist with an orderly liquidation process if necessary.”

Richard Milne and Harriet Agnew of the Financial Times also report Goldman Sachs takes $900mn hit on Northvolt investment:

Funds managed by Goldman Sachs will write off almost $900mn after Swedish battery maker Northvolt filed for Chapter 11 bankruptcy this week.

Goldman’s private equity funds have at least $896mn in exposure to Northvolt, making the US bank its second-largest shareholder. They will write that down to zero at the end of the year, according to letters to investors seen by the Financial Times.

The losses mark a sharp contrast to a bullish prediction just seven months ago by one of the Goldman funds, which told investors that its investment in Northvolt was worth 4.29 times what it had paid for it, and that this would increase to six times by next year.

Goldman said in a statement: “While we are one of many investors disappointed by this outcome, this was a minority investment through highly diversified funds. Our portfolios have concentration limits to mitigate risks.”

Goldman first invested in Northvolt in 2019 when, along with other investors including German carmaker Volkswagen, it led a $1bn Series B funding round that enabled Northvolt to build its first factory in northern Sweden, and fuel future expansion.

The funding round was hailed by Northvolt chief executive Peter Carlsson as “a great milestone for Northvolt” — then a four-year old start-up — and “a key moment for Europe” in its push to counter Asian dominance of battery making.

But Europe’s one-time big battery hope filed for Chapter 11 bankruptcy in the US on Thursday and Carlsson resigned the following day, warning European politicians, companies and investors not to get cold feet on the green transition.

By Thursday the lossmaking Swedish group, which was Europe’s best-funded private start-up after raising $15bn from investors and governments, had just $30mn in cash — enough for a week’s operations — and $5.8bn in debt.

That day Goldman, which owns a 19 per cent stake in Northvolt through various funds, wrote to its investors explaining that it would mark down to zero its investments.

The bank, which had taken part in several subsequent funding rounds over the past five years, said that over the last several months it had been working with Northvolt’s customers, lenders and shareholders to secure short-term bridge financing to shore up the battery maker’s financial position, restructure its capital stack and raise longer-term financing to support a revised business plan.

But “despite our extensive efforts as a minority shareholder to bring Northvolt’s various shareholders together, a comprehensive solution was not found”, it said in the letters to shareholders.

Goldman’s private equity business was established in 1986 and sits within Goldman Sachs Asset Management, which has over $3tn in assets under supervision, including over $500bn in alternative investments such as private equity.

Two buyout funds West Street Capital Partners VII and West Street Capital Partners VIII have $407mn and $346mn invested in Northvolt, respectively. Horizon Environment and Climate Solutions 1, a growth equity strategy touted as Goldman’s first direct private markets strategy dedicated to investing in climate and environmental solutions, has $116mn invested in Northvolt; and a fund called StoneBridge 2020 invested $27mn.

Goldman’s so-called 1869 fund, a vehicle that gives its network of former partners access to multiple private funds managed by the fund’s asset management division, also had a small amount of exposure to Northvolt, because the fund has committed 25 per cent of its capital commitments to West Street Capital Partners VIII, investors said.

Goldman Sachs’ investment banking business is also a large creditor of Northvolt; the battery company owes it $4.78mn, according to its Chapter 11 filing.

Volkswagen is Northvolt’s largest shareholder with a 21 per cent stake and is likely to be nursing similar losses. It is listed as Northvolt’s second-largest creditor in the Chapter 11 filing due to a $355mn convertible note.

Some investors have privately complained that Goldman and other funds pushed them hard to back Northvolt. They have also said that this, combined with Northvolt’s bankruptcy, could affect investors’ desire to support the green transition.

Northvolt has said it needs $1-1.2bn extra financing to exit Chapter 11 in the first quarter of next year, and is talking to various investors and companies about partnerships. By filing for Chapter 11 it can access finance including $145mn in cash and $100mn from Swedish truckmaker Scania.

The Swedish group struggled to expand production in its sole factory in Skellefteå in northern Sweden. Executives conceded it should have scaled back earlier expansion plans to build additional facilities in Germany and Canada which were backed by extensive subsidies from each country’s government.

What a mess, Northvolt's collapse has hit many investors, including Canadian pension funds.

Last week, Jeffrey Jones and James Bradshaw of the Globe and Mail report on their exposure to the struggling EV battery maker:

Several Canadian pension funds have sizable financial exposure in the event of a bankruptcy filing by Northvolt AB, the Swedish battery maker that is burning through cash as growth in demand for electric vehicles lags expectations.

Canada Pension Plan Investment Board, Investment Management Corp. of Ontario (IMCO), Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec participated in US$2.3-billion in convertible debt financings for Stockholm-based Northvolt, joining major automakers and financial institutions to support the European battery hope as its future looked bright. OMERS also bought an undisclosed number of Northvolt shares in 2021.

The Financial Times reported on Sunday that Northvolt is considering seeking protection from creditors in the coming days after talks about a rescue package collapsed. The company is still trying to secure short-term financing, but time is getting short, the FT said, quoting unnamed people involved in the negotiations.

Northvolt has suffered this year as EV demand growth slowed and a US$2.15-billion battery order was cancelled. In recent months, it has cut a fifth of its staff and shelved many of its expansion plans. Meanwhile, the fate of a $7-billion factory planned for Quebec has yet to be decided.

Northvolt said little about its current predicament when contacted by The Globe and Mail on Monday. “Financing negotiations are ongoing,” Northvolt spokesperson Emmanuelle Rouillard-Moreau said in an e-mail. “We are maintaining close communication with our investors and key partners. We will share updates and the outcome of these discussions once decisions have been finalized.”

The terms of Northvolt’s convertible debt – including under what circumstances it would be swapped for equity – have not been disclosed, which makes it hard to gauge where the four Canadian pension funds rank in terms of seniority in the event of a bankruptcy, or how much of their initial investments are at risk of being wiped out. Lenders typically rank ahead of equity owners when a company is restructured.

Northvolt’s ownership group also includes some of the biggest automotive and financial names, such as Volkswagen AG, Bayerische Motoren Werke AG and Goldman Sachs. The latter was said to be leading ill-fated rescue-package talks that were aimed at securing a reported US$300-million.

The total exposure among the Canadian pension funds is murky, making it difficult to glean the precise values of the funds’ investments from public disclosures. The four pension-fund managers participated in a series of debt issues in 2023, including a US$400-million investment from IMCO. CPPIB invested US$55-million, while OMERS and BlackRock Inc., which is the world’s largest asset manager, also participated as Northvolt expanded its existing US$1.1-billion convertible debt program to US$2.3-billion.

In November, 2023, the Caisse took on US$150-million in convertible debt.

OMERS was an earlier backer of the battery maker and has made three investments, starting with the purchase of an undisclosed stake in a US$2.75-billion private placement of equity alongside a host of other investors, including Swedish pension funds, Goldman Sachs and Volkswagen. OMERS has not disclosed the size of its equity position.

Spokespeople for OMERS, CPPIB, IMCO and the Caisse all declined to comment beyond confirming investments that were publicly announced.

In September, Northvolt announced it was cutting its Swedish work force by 1,600 and suspending a number of its expansion projects. It retreated from its growth strategy as automakers such as General Motors Co. GM-N, Ford Motor Co. F-N, Volvo Car AB and Volkswagen tempered their EV outlooks and spending to deal with high capital costs and some resistance among car buyers, who face sticker shock and still-spotty charging infrastructure. In June, BMW cancelled a US$2.15-billion order for Northvolt battery cells.

All of this turmoil has raised questions about the Quebec plant, which has been awarded billions of dollars in loans and production incentives from the federal and Quebec governments. Northvolt has said that it is conducting a strategic review of the facility in Saint-Basile-le-Grand, Que., and results are expected in the coming weeks.

Well, I think today's message is clear, Northvolt is in survival mode and will delay projects to build battery plants in Canada and Germany.

How could this happen? How did a company widely viewed as the preeminent player in the energy transition market, one coveted by world-class investors, end up collapsing so fast after billions were poured to finance its operations?

From the first article:

“A dilemma that these ambitious newcomers are facing is that from the get-go, they had to announce very large-scale plans in order to be attractive for financiers,” said Robert Heiler, senior manager at Porsche Consulting, part of the sportscar unit of Volkswagen, Northvolt’s top investor. “But it’s really difficult to scale up” various operations “all at the same time,” he said.

Add to this the collapse in demand for EVs and the surge in supply of EV batteries from China and South Korea and you have a recipe for disaster.

In short, everything that can go wrong for Northvolt and its investors did go wrong and now (equity) investors got wiped out, suffering the biggest losses:

For their part, Canadian pension funds were exposed -- OMERS probably the most and CPP Investments and CDPQ the least with IMCO somewhere in the middle (need to verify this) -- but they provided debt financing in the form of convertible bonds so they will get hit hard but not totally wiped out (depends on where they stand in the debt seniority chain).

However, governments will feel the sting too, in particular the Quebec and federal government and taxpayers who backed these battery plants to the tunes of billions in subsidies.

And Northvolt's collapse is the tip of the iceberg, others might follow as EV demand plummets.

It was exactly a year ago that Peter Zimonjic of CBC News reported EV battery deals to cost $5.8B more due to lost corporate tax on subsidies, budget officer says:

Provincial and federal financial support for electric vehicle battery production will cost $5.8 billion more than government projections due to tax treatment of subsidies, the Parliamentary Budget Office said Friday morning.

The PBO report says the shortfall of $5.8 billion over 10 years can be attributed to lost corporate income because the Canadian deal has to keep pace with the Advanced Manufacturing Production Credit (AMPC) in the United States. 

Under the U.S. deal, manufacturers get a tax credit, based on a calculation of per kilowatt-hour of energy, but in Canada that financial support per kilowatt-hour is delivered through a taxable subsidy. 

"Therefore, under existing law in Canada, these payments would be subject to applicable federal and provincial corporate income tax," the report said.

The PBO report makes the assumption that to stay on par with the U.S. AMPC, the subsidies will be exempt from federal and provincial taxes, which would cost about $5.8 billion in tax revenue.

An analysis of government support for the EV battery deals with Northvolt, Volkswagen and Stellantis-LGES said that over the next 10 years, that support will amount to $43.6 billion, rather than the announced costs of $37.7 billion. 

The deals with the three manufacturers amount to production subsidies of $32.8 billion, with an additional $4.9 billion in support to build the facilities.

"Of the $43.6 billion in total costs, we estimate that $26.9 billion (62 per cent) in costs will be incurred by the federal government and $16.7 billion (38 per cent) will fall on the provincial governments of Ontario and Quebec," the report said.

Break-even estimates

The report, which also looked at how long it will take for governments to break even on their investments, found that the Northvolt deal has a break-even time of 11 years, two years longer than the federal government's estimate. 

The break-even time for the $13.2-billion Volkswagen deal is 15 years, while the break-even time for the $15-billion Stellantis-LGES deal was pegged at 23 years, the report said.

In the PBO's September report, Yves Giroux, the parliamentary budget officer, said the government's shorter break-even timeline estimate relied on modelling from the Trillium Network for Advanced Manufacturing and Clean Energy Canada, which included investments and assumed production increases in other areas of the EV supply chain.

Giroux's reports only looked at cell and module manufacturing and not the expected revenue from spillover impacts on the economy as a whole.

The report also assumes that government investments will be debt-financed and therefore will incur public debt charges over the next decade that could amount to $6.6 billion.

Pros and cons

Ian Lee, a professor at Carleton University's Sprott School of Business, told CBC news the PBO was right to exclude calculations estimating the economic benefits of strengthened supply chains because they can be misleading. 

"This is political spin masquerading as serious econometric analysis. This is why the PBO rejected it," he said. "Anyone can provide any number to produce the number they want … It is not evidence based but pure speculation that appears credible."

Lee described the possible economic advantages of developing EV battery and car manufacturing as "investor hype" and said that Canada's auto sector is in decline and the investment "will ultimately fail."

Economist Jim Stanford, director of the B.C. based Centre for Future Work, told CBC News the PBO report misses the point of the subsidies by choosing to evaluate them as an investment, rather than an attempt to ensure the economy is well-placed to capitalize on the green transition.

"The government is supporting these plants because that is what's required to maintain the auto industry, and all of the economic and social benefits that it generates, as it transitions to EVs," he told CBC. 

The PBO's "cost benefit lens for all of these reports is ridiculously narrow, and misses the point of why governments are doing this," he added.

Stanford said that without government subsidies to draw in foreign investment, Canada's auto industry would disappear within 15 years. To get better value for the EV investment program, the PBO should compare the subsidy programs to doing nothing and allowing the industry to fail, he said.

Stanford also said that ignoring the economic impacts to the overall economy of the EV subsidy program is the "fatal flaw" in the PBO report.

The 3 big deals

The new manufacturing facility to be built by Northvolt, a Swedish battery giant, will occupy 170 hectares — an area the size of more than 300 football fields — on Montreal's South Shore, in a parcel of land spanning two communities.

The combined production and construction incentives total up to $4.6 billion for the project — one-third of which will come from Quebec — as long as similar incentives remain in place in the U.S.

In the spring, the federal government announced $13.2 billion in production subsidies over the next 10 years to build a battery plant in St. Thomas, Ont. That plant will be the size of 391 football fields and bring auto jobs to the region.

Stellantis-LGES halted construction on a Windsor, Ont., battery plant this summer, saying the provincial and federal governments would need to come through with more than the initial investment of $500 million. Construction resumed after the governments announced up to $15 billion in subsidies.

That plant is expected to open in 2024 and employ about 2,500 people.

There's no question governments need to provide subsidies but every time a Nortvolt or another EV battery project fails, it costs taxpayers billions.

Still, the collapse of Canada's auto sector will cost thousands of jobs and lost income taxes (revenue for the government), not to mention set the country back so governments are damned if they do, damned if they don't (provide subsidies).

One thing is clear however, Northvolt was extremely poorly managed and Peter Carlsonn was right to step down.

The energy transition will happen with or without Northvolt but it will be a real shame if this company which was at the forefront of so many good things in the energy transition spectrum isn't part of this journey.

At the end of the day, economics rules the day, you can't expand forever and expect taxpayers and investors to cough up more money. At one point, you need to show results.

Below, Northvolt's financial collapse deals a blow to Europe's plan to set up its own battery industry to power electric cars, stirring a debate about whether it needs to do more to attract investment as startups struggle to catch up with Chinese rivals.

Next, Swedish battery company Northvolt has filed for bankruptcy in the US, in a setback for Europe’s ambitions to compete with the largest Asian producers of lithium ion batteries for electric vehicles. In this video Benchmark analyst Shivangee Chauhan discusses what it means for European battery production.

Third, Northvolt bankruptcy: "Its what's called a Chapter 11 bankruptcy protection," but what doe sit mean? CGTN Europe interviewed Daniel Harrison, Automotive analyst, Ultima Media.

Lastly, Swedish EV battery maker Northvolt has officially filed for bankruptcy protection in the U.S. Heather Wright on what this means for Canada.

Jacob Serebrin of the Montreal Gazette reports former Caisse executives took part in Indian bribery scheme, U.S. officials allege:

Senior executives at Quebec’s provincial pension fund manager tried to win contracts by paying Indian officials hundreds of millions of dollars in bribes and interfered with corruption investigations in the United States, American prosecutors allege.

Federal prosecutors in New York City have charged three former Caisse de dépôt et placement du Québec executives with conspiracy to violate the U.S. Foreign Corrupt Practices Act and conspiracy to obstruct justice for their alleged roles in a bribery scheme and attempted coverup.

The most senior of those former officials, Cyril Cabanes, who was in charge of the Caisse’s infrastructure investments in the Asia-Pacific and Middle East regions at the time of the alleged offences, has also been charged with violating the Foreign Corrupt Practices Act by the U.S. Securities and Exchange Commission.

“This indictment alleges schemes to pay over US$250 million in bribes to Indian government officials, to lie to investors and banks to raise billions of dollars, and to obstruct justice,” deputy assistant attorney general Lisa H. Miller said in a statement. “These offences were allegedly committed by senior executives and directors to obtain and finance massive state energy supply contracts through corruption and fraud at the expense of U.S. investors.”

Also among those charged in connection with the alleged scheme are Saurabh Agarwal, the former managing director of the Caisse’s infrastructure investments in South Asia and former managing director of CDPQ India, and Deepak Malhotra, a former director of infrastructure investments in South Asia for the Caisse.

Cabanes and Malhotra sat on the board of Azure Power Global Ltd., an Indian green energy company at the centre of the alleged bribery scheme. The Caisse bought a controlling share of the company in 2020 and Cabanes served as its representative on Azure’s board.

“CDPQ is aware of charges filed in the U.S. against certain former employees. Those employees were all terminated in 2023 and CDPQ is co-operating with U.S. authorities. In light of the pending cases, we have no further comment at this time,” the Caisse said in an emailed statement.

U.S. prosecutors have also charged Gautam Adani, widely considered to be Asia’s second-richest man, and two other executives at a Indian green energy company that is part of a conglomerate he controls with several fraud-related charges in connection with the alleged scheme.

In 2019, his company, Adani Green Energy Ltd., and Azure won contracts from the Indian national government to build a solar power production facility, according to an SEC charging document filed in a New York City federal court.

But the companies struggled to secure deals with power distribution companies owned by Indian states to buy electricity at the price set by the national government.

In order to get those power purchase agreements, “Azure and Adani Green, acting through various senior executives and officials, undertook a massive bribery scheme,” according to the SEC, allegedly paying hundreds of millions in bribes to state officials to obtain the contracts, which could generate up to US$2 billion in profits for Azure alone.

According to an indictment unsealed Wednesday afternoon, the former CEO of Azure, Ranjit Gupta, who has also been charged by U.S. prosecutors, began plotting with Adani and other executives at Adani Green to pay bribes, eventually reaching an agreement to pay one-third of the total.

As Agarwal, Malhotra and Cabanes learned of the agreement, they became willing participants, prosecutors claim.

According to the indictment, Agarwal, Malhotra and Cabanes discussed multiple strategies to transfer the bribe money, with Agarwal making a PowerPoint presentation of possibilities. Eventually, the indictment says, they settled on a plan to transfer part of the power generation contract to Adani.

At the time, Cabanes “had the authority to direct the actions of certain CDPQ personnel who reported to him — including other members of Azure’s board — as well as the actions of Azure’s executive team,” according to the SEC.

When Azure’s board chair, identified as “co-conspirator #1,” notified the three Caisse executives of an SEC investigation, they created a sham internal investigation, revealing that they had been asked for bribes, but not that they had agreed to pay them, and destroyed evidence, according to the indictment.

“This strategy was designed to create the appearance that the co-conspirators were reporting misconduct, rather than perpetuating misconduct, which, in turn, aided the co-conspirators’ continued efforts to further the ongoing bribery scheme and to conceal the true nature of the bribery scheme from the board of directors and government investigations,” the indictment reads.

While the companies aren’t named in the criminal indictment, they are named in the SEC charging document, which names the same individuals as the indictment and recounts the same facts.

U.S. authorities say they have jurisdiction because Azure shares traded on a U.S. stock exchange until the company was delisted in 2023 and because some of Cabanes’s actions took place in the U.S.

Adani Green sought to raise money from U.S. investors and misled them, in violation of U.S. law, American authorities say.

The Adani Group said in a statement that the charges are “baseless and denied” and that it plans to use all legal means to fight them. Azure’s current management said in a statement that it is co-operating with the investigation.

None of the accused have been taken into custody and all of those charged are Indian citizens who were living in India at the time of the alleged offences, except for Cabanes, an Australian and French citizen, who was living in Singapore.

James Bradshaw of the Globe and Mail also reports former Caisse executives face U.S. charges in alleged bribery scheme involving Indian billionaire:

Prosecutors in the United States have charged three former executives of Quebec-based pension fund manager Caisse de dépôt et placement du Québec with obstructing an investigation into an alleged bribery scheme involving Indian billionaire Gautam Adani.

The charges filed by the U.S. Attorney’s Office in New York allege that Mr. Adani and executives from energy subsidiaries of his business conglomerate conspired in a scheme to pay more than US$250-million in bribes to Indian government officials. The payments were allegedly to help secure favourable contracts tied to a major solar energy project.

Separately, the Securities and Exchange Commission charged Mr. Adani and his nephew, Sagar Adani, as well as Cyril Cabanes, a former managing director of infrastructure for the Asia Pacific region at the Caisse, “for conduct arising out of a massive bribery scheme.”

New York prosecutors also charged Mr. Cabanes as well as former managing director of CDPQ India Saurabh Agarwal and Deepak Malhotra, a former director of infrastructure for South Asia at the Caisse, with conspiracy to obstruct justice. CDPQ India is a subsidiary of the pension manager that operates in that country.

The charges allege that the three executives, who were then employed by the Caisse, tried to thwart an investigation by deleting e-mails and presentations that summarized the bribes, and misled investors from the Federal Bureau of Investigation, the Justice Department and the SEC.

The allegations have not been proven in court.

“CDPQ is aware of charges filed in the U.S. against certain former employees. Those employees were all terminated in 2023 and CDPQ is co-operating with U.S. authorities. In light of the pending cases, we have no further comment at this time.”

Court filings allege that Mr. Agarwal and Mr. Malhotra, who were based in India, first learned about the bribery scheme late in 2021, and shared that information with Mr. Cabanes. When communicating about the scheme, the filing alleges, they often referred to Mr. Adani and another defendant by code names such as “Numero uno” and “the big man.”

After authorities launched investigations, the three executives then employed by the Caisse used a strategy “designed to create the appearance that the co-conspirators were reporting misconduct rather than perpetrating misconduct,” prosecutors allege. They also allege the three men “destroyed or otherwise concealed evidence.”

The prosecutors allege that the scheme was hidden from U.S. banks and investors, from whom the defendants raised billions of dollars.

The charges appear to relate to Azure Power Global Ltd., a New-Delhi-based company that saw its share price plunge in 2022 when it announced the resignation of its CEO and a whistle-blower complaint. That wiped out hundreds of millions of dollars of value from investment portfolios held by the Caisse and Ontario Municipal Employees Retirement System, which together owned a majority stake in Azure.

Mr. Cabanes, who was based in Singapore, was formerly a member of Azure’s board of directors.

The charges filed in New York identify an “Indian Energy Company” that specialized in renewable energy, headquartered in India, as well as another renewable energy company identified as the “U.S. Issuer.” The SEC complaint appears to identify those companies as Adani Green Energy Ltd. and Azure Power.

It says the bribery scheme paid Indian government officials to secure promises to buy energy at above-market rates that would benefit the companies.

Mr. Adani is one of the world’s richest people with an estimated net worth of nearly US$70-billion, according to Forbes, and has close ties to Indian Prime Minister Narendra Modi.

“As alleged, the defendants orchestrated an elaborate scheme to bribe Indian government officials to secure contracts worth billions of dollars,” said Breon Peace, U.S. Attorney for the Eastern District of New York, in a statement. Mr. Adani and two other defendants “lied about the bribery scheme as they sought to raise capital from U.S. and international investors.”

Barbara Shecter and Jordan Gowling of the National Post also report former Caisse employees face U.S. charges in sweeping Adani bribery indictment:

Three former employees of the Caisse de dépôt et Placement du Québec are facing charges as part of a sweeping indictment by the U.S. Attorney’s Office for the Eastern District of New York that accuses Gautam Adani, chair of India’s Adani Group and one of the world’s richest men, of a massive bribery scheme involving Indian officials and billions of dollars in solar energy contracts.

According to the indictment, which was unsealed on Wednesday, U.S. federal prosecutors allege Adani and associates offered to pay US$250 million to Indian government officials between 2020 and 2024, in exchange for lucrative solar energy projects for two companies, while concealing their bribery scheme when they sought funding for the same projects from U.S. investors.

Others named in the indictment include three former employees from the Caisse, Quebec’s largest pension fund — Cyril Cabanes, 50, Saurabh Agarwal, 48, and Deepak Malhotra, 45 — who are accused of obstructing a grand jury, the Federal Bureau of Investigation (FBI) and the U.S. Securities Commission, in investigations of the alleged bribery scheme.

According to the indictment, the former employees of the Canadian institutional investor, along with a fourth man, allegedly agreed “to delete electronic materials related to the bribery scheme, including emails, electronic messages and bribery analyses.”

They are also alleged to have caused the board of directors of a U.S. company to initiate an internal investigation into the bribery scheme “and then withheld material information from that investigation.”

The former Caisse employees are charged with conspiracy to violate the Foreign Corrupt Practices Act.

They are also alleged to have falsely denied their participation in the bribery scheme to representatives of the FBI, DOJ and SEC at meetings in Brooklyn, New York, leading to a charge of conspiracy to obstruct justice.

None of the allegations have been tested in court.

In a emailed statement, the Caisse said the three employees were terminated in 2023 and that it was cooperating with U.S. authorities.

Malhotra was a director of infrastructure for South Asia, according to an article on the Infrastructure Investor website, which reported all three had left the Caisse in 2023.

Agarwal joined the Caisse in 2017 and became managing director for CDPQ India in 2022, where he represented “the organization in the financial and business community, as well as with key stakeholders including the government and regulators,” according to his Linkedin profile.

Cabanes spent seven years as the managing director of infrastructure for the Asia Pacific and Middle East regions based out of Singapore, according to his Linkedin profile.  He oversaw a team of 25 investment professionals based in Singapore, Sydney and Delhi managing assets that included renewables, ports, electricity networks and power generation. Cabanes currently serves as chief executive at MorGen Energy, a hydrogen energy company based out of Zurich, Switzerland.

From 2017 to 2023, Cabanes was a non-executive director of Azure Power Global Ltd., one of two companies that were part of the scheme alleged by U.S. authorities. According the U.S. Attorney’s indictment, Malhotra also held a non-executive director role at Azure.

The indictment alleges that Cabanes first became aware of the bribery scheme in December of 2021, after he was told by Agarwal and Malhotra. By the spring of 2022, Cabanes, Agarwal and Malhotra made plans on how Azure Power would pay for the portion of bribe payments promised by a company the indictment refers to as “Indian Energy Company” on behalf of Azure Power.

In 2020, the Caisse became the majority shareholder in Azure Power Global Ltd., owning 24,259,272 shares representing a 50.9 per cent stake in the company. In 2021, the Ontario Municipal Employees Retirement System also purchased a 19.4 per cent stake in the company, valued at US $219 million.

The India-based renewable energy company traded on the New York Stock Exchange until it was delisted late last year. The other company named by authorities is Adani Green Energy Ltd., which the SEC says raised $175 million from U.S. investors while the alleged bribery scheme was in progress.

The indictment does not name the Caisse directly, but refers to a “Canadian Investor” that is an institutional investor headquartered in Canada that managed funds for Canadian public retirement and insurance plans.

By June of 2022, Agarwal and Cabanes agreed to “delete electronic messages they had exchanged about what they would report to the Canadian Investor and the Canadian Investor Subsidiary about the scheme,” the indictment alleges.

According to a news release issued Wednesday by the U.S. SEC, Cabanes, who is no longer a member of Azure Power’s board of directors, is alleged to have “facilitated the authorization of bribes in furtherance of the scheme while in the United States and abroad.”

According to the indictment, the three men were questioned by the FBI, the SEC and the U.S. Department of Justice between March and July of 2023, where they denied any participation in the bribery scheme.

In statement, the Caisse said it “is aware of charges filed in the U.S. against certain former employees. Those employees were all terminated in 2023 and CDPQ is cooperating with U.S. authorities. In light of the pending cases, we have no further comment at this time.”

Last July, the New York Stock Exchange took steps to delist the shares Azure Power Global Ltd., which was unable to file required regulatory documents. The company attempted to have the decision to delist reversed, but it proceeded on Nov. 13, 2023, according to a news release.

Anne-Louise Stranne Petersen of Infrastructure Investor also reports CDPQ’s former Asia-Pacific infra head targeted in US bribery charges:

Three former CDPQ infrastructure executives, whose departures from the Canadian pension fund were revealed by Infrastructure Investor in January, have had charges brought against them by US authorities in an alleged case of bribery.

The charges concern former executives Cyril Cabanes, Deepak Malhotra and Saurabh Agarwal for their participation in an alleged bribery scheme involving Indian conglomerate Adani Group alongside renewables firm Azure Power.

CDPQ is Azure Power’s largest shareholder, owning just over 50 percent, while compatriot OMERS Infrastructure also owns about 19 percent. Adani Green Energy, majority-owned by the Adani Group, was another alleged beneficiary of the scheme.

Cabanes was CDPQ’s long-serving managing director of infrastructure for the Asia-Pacific and Middle East. Agarwal was managing director of CDPQ India and managing director, infrastructure for South Asia, while Malhotra was a director, infrastructure for South Asia. The reason for their exits were not known when reported on in January.

Asked to comment on the charges against three of its former executives, a spokesperson for CDPQ told Infrastructure Investor: “CDPQ is aware of charges filed in the US against certain former employees. Those employees were all terminated in 2023 and CDPQ is co-operating with US authorities. In light of the pending cases, we have no further comment at this time.”

The criminal charges filed on 24 October and unsealed Wednesday by the US Attorney’s Office for the Eastern District of New York allege that, in 2021-22, the three former CDPQ executives “knowingly and willfully joined the conspiracy” started in 2020 by senior members of the Adani Group – including Gautam Adani, the billionaire chair of the Indian conglomerate – to “corruptly offer, authorise, promise to pay and pay bribes”.

Further, they also “agreed knowingly and corruptly to conceal the scheme from the United States government” including by obstructing an investigation by a grand jury, the FBI, the Justice Department and the Securities and Exchange Commission.

According to the SEC – which has brought its own charges, albeit only against Cabanes, Gautam Adani and his nephew, Sagar Adani, the executive director of Adani Green’s Board – the bribery scheme involved paying or promising to pay the equivalent of hundreds of millions of dollars in bribes to Indian government officials to secure their commitment to purchase energy at above-market rates that would benefit Azure Power, as well as Adani Green Energy.

At the time, Adani Green Energy raised $175 million from US investors, while the bribery scheme was in progress.

“As alleged, Gautam and Sagar Adani induced US investors to buy Adani Green Energy bonds through an offering process that misrepresented not only that Adani Green Energy had a robust anti-bribery compliance programme but also that the company’s senior management had not and would not pay or promise to pay bribes, and Cyril Cabanes participated in the underlying bribery scheme while serving as director of a US public company,” said Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement.

The SEC’s complaint against the three seeks permanent injunctions, civil penalties, and officer and director bars.

Cabanes joined the Canadian pension in March 2016 and left in October 2023. In July, he became chief executive officer of Trafigura-owned MorGen Energy, a European green hydrogen company. Asked to comment, Trafigura told Infrastructure Investor through a spokesperson that: “Trafigura and MorGen became aware of the charges against Mr Cabanes when the US authorities made a public announcement overnight. It has been agreed with Mr Cabanes that he will step back from his day-to-day responsibilities while we review the matter. Neither MorGen Energy nor any Trafigura Group company is a party to these proceedings.”

Cabanes did not respond to a request for comment.

Malhotra joined CDPQ in 2018 and also left at the end of October 2023. Both he and Cabanes had served on Azure Power’s board, resigning on 1 November 2023. Agarwal was not an Azure Power board member. He left the Canadian pension in August of last year. They could not be reached for comment in time for publication.

In a statement provided to the media, the Adani Group rejected the charges: “The allegations made by the US Department of Justice and the US Securities and Exchange Commission against directors of Adani Green Energy are baseless and denied,” adding that “all possible legal recourse will be sought”.

12GW of contracts

CDPQ initially invested $140 million in Azure Power in September 2016, taking a 21 percent stake in the company, before it went public. A further $100 million was invested in October 2018, lifting its stake to 40 percent. CDPQ became a 49.4 percent shareholder in November 2019 when it injected a further $75 million, before becoming the majority 50.9 percent shareholder in March 2020.

The issue centres on contracts for a total of 12GW of solar power to be developed in India. Azure Power was contracted to deliver 4GW of PV to the Solar Energy Corporation of India (SECI) – owned by the Indian federal government – while Adani Green had contracts for 8GW. These contracts were awarded in 2020 and SECI was responsible for finding offtakers among state electricity distribution companies.

It is alleged that when it became clear that state-owned utilities were unwilling to pay above-market rates for power, bribes to the tune of “hundreds of millions of dollars” were paid, or promised to be paid to Indian government officials to ensure that PPAs could be signed with SECI and hence allow Azure Power and Adani Green Energy to develop the projects and profit, according to the SEC.

For its part, Azure Power said in a statement: “[Azure Power] is aware of the actions announced by the US Department of Justice and US Securities and Exchange Commission against certain former directors and officers of Azure, as well as certain third parties. As Azure initially disclosed in January 2023 and in subsequent filings and annual reports, it has co-operated with those agencies and it will continue to do so. The former directors and officers of Azure referenced in the US Department of Justice and US Securities and Exchange Commission actions ceased to be associated with Azure more than a year ago. Azure is not a defendant in either action and will not be commenting further at this time.”

Aman Malik of VCCircle also reports former CDPQ India head, Gautam Adani, and others charged in US bribery case:

Three former executives of Canadian pension fund CDPQ, including a former India head, have been indicted along with Indian billionaire Gautam Adani and four others by US prosecutors for their alleged role in what may have been a case of multi-billion-dollar bribery and fraud, the US Department of Justice said.

Cyril Cabanes, a former managing director of infrastructure for Asia-Pacific at CDPQ; Saurabh Agarwal, the pension fund’s former India MD; and Deepak Malhotra, its former director of infrastructure for South Asia; have been named alongside Gautam Adani, his nephew Sagar Adani and Vineet Jaain for allegedly agreeing to pay $250 million (over Rs 2,100 crore) in bribes to officials in India. The alleged bribe was paid between 2020 and 2024 to win solar energy supply contracts that could yield profits of $2 billion over a 20-year period, the Department of Justice said in a statement.

The indictment also names Ranjit Gupta, formerly the CEO of CDPQ-controlled Azure Power, and Rupesh Agarwal, the former Chief Strategy and Commercial Officer at the green energy firm.

Cabanes had left CDPQ in January this year and is now the chief executive officer at MorGen Energy, according to his LinkedIn profile. Agarwal quit CDPQ in India a little over a year after being elevated to the top job as VCCircle had noted. He had been named managing director for India in March 2022 after the departure of Anita George in January last 2022. According to his LinkedIn profile, he is currently self-employed. Malhotra, too, reportedly left around the same time as Cabanes. It is unclear where he is working right now.

CDPQ is the majority owner of India-based green energy firm Azure Power that was earlier listed on the New York Stock Exchange (NYSE) but has since been delisted from the bourse.    

Gupta had quit Azure in April 2021. He was succeeded by Harsh Shah, who quit rather abruptly barely a month after taking over the top job at the company. Shah had cited "unforeseen circumstances and matters beyond his control" for his abrupt departure. Shah went back to joining the KKR-backed InvIT IndiGrid as its CEO. Rupesh Agarwal had been appointed acting CEO in August 2022 after Shah left.  

Cabanes, who was on the board of directors at Azure Power, has been charged with violations of the Foreign Corrupt Practices Act (FCPA) for his role in the alleged bribery scheme. Cabanes allegedly facilitated the authorization of bribes in furtherance of the scheme while in the US and abroad, as per a complaint by the US Securities and Exchange Commission. 

“According to the SEC’s allegations, the bribery scheme was orchestrated to enable the two renewable energy companies to capitalise on a multi-billion-dollar solar energy project that the companies had been awarded by the Indian government. During the alleged scheme, Adani Green raised more than $175 million from US investors and Azure Power’s stock was traded on the New York Stock Exchange,” the SEC said separately.

Apart from this, the Adani Group’s green energy company is also alleged to have raised bonds and loans worth more than $3 billion allegedly based on false and misleading statements, reports said.  

While Gautam Adani heads the Adani Group, his nephew is an executive director on Adani Green’s board.

The SEC complaint says that the Adanis paid or promised to pay hundreds of millions of dollars in bribes to government officials in India to get their commitment on purchasing energy at above market rates, which would directly benefit Adani Green and Azure Power.  

The allegations say that the Adanis were engaged in the bribery scheme during a 2021 offering by Adani Green that raised $750 million, of which $175 million was raised from US investors. “The Adani Green offering materials included statements about its anti-corruption and anti-bribery efforts that were materially false or misleading in light of Gautam and Sagar Adani’s conduct,” the SEC said in its statement.    

The SEC’s division of enforcement, which is headed by an Indian origin official Sanjay Wadhwa, has alleged that the Adanis induced investors in the US to purchase bonds of Adani Green via an offering that not only allegedly misrepresented that Adani Green had an anti-bribery compliance programme but also that the senior management would not indulge in bribery. Cabanes is alleged to have participated in the bribery scheme while serving as director at Azure, which was then publicly-listed on the NYSE.  

The SEC’s complaint against Gautam and Sagar Adani charges them with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctions, civil penalties, and officer and director bars. The SEC’s complaint against Cabanes charges him with violating the FCPA and seeks a permanent injunction, a civil penalty, and an officer and director bar. Both complaints were filed in the US District Court for the Eastern District of New York.     

Most Adani Group stocks were down over 10% on Indian stock exchanges in Thursday trade, following these allegations.

Layan Odeh and Mathieu Dion of Bloomberg also report Adani bribery charges add to Quebec pension’s India Nightmare:

Follow Bloomberg India on WhatsApp for exclusive content and analysis on what billionaires, businesses and markets are doing. Sign up here.

US bribery charges against Indian billionaire Gautam Adani have ensnared one of Canada’s largest public pension managers, deepening its embarrassment over a renewable-energy investment that went sour. 

Three former employees of Caisse de Depot et Placement du Quebec were charged with conspiracy to violate the Foreign Corrupt Practices Act on Wednesday. The list of the accused includes Cyril Cabanes, a former managing director in CDPQ’s Asia-Pacific infrastructure unit, as well as Saurabh Agarwal and Deepak Malhotra, who also worked for the fund manager.

US prosecutors allege that defendants including Adani, one of the world’s richest people, promised to pay more than $250 million in bribes to Indian government officials to win solar energy contracts, and that they concealed the plan as they sought to raise money from US investors. 

The criminal indictment and a related case from the Securities and Exchange Commission allege that executives at Adani Green Energy Ltd. were among those who paid bribes to state officials. Some of the bribes were ultimately paid, at least indirectly, by Azure Power Global Ltd., a builder and operator of solar-power projects that was a partner of Adani Green, according to the SEC.

The regulator’s complaint says that Cabanes “schemed” with others to make those payments possible while he was serving as an employee of CDPQ and a board member of Azure Power. 

CDPQ is Azure’s majority shareholder, and Cabanes and Malhotra represented the money manager on the solar company’s board until October 2023, when they resigned. 

Azure said it’s cooperating with US authorities on the investigation. The shares were delisted from the New York Stock Exchange and now trade over the counter, having lost almost all of their value. 

“CDPQ is aware of charges filed in the US against certain former employees,” a spokesperson for the Quebec pension manager said by email. “Those employees were all terminated in 2023, and CDPQ is cooperating with US authorities.” The spokesperson declined further comment. 

Reluctant Governments

Prosecutors claim that executives attached to Adani Green paid or promised the bribes to overcome the reluctance of Indian state governments to sign power purchase agreements — contracts that were essential to making the numbers work on new solar manufacturing projects. 

Over a period of many months in 2022 and 2023, Cabanes “routinely strategized” with Azure’s chairman to figure out how to pay Azure’s one-third share of the bribes, the SEC complaint alleges. 

Eventually, they landed on a plan that saw Azure give up a lucrative share of a large power project in the southern state of Andhra Pradesh — to the benefit of Adani Green, which gained a bigger stake. 

“Cabanes devised and directed a coordinated cover-up of the efforts to compensate Adani Green and the Adanis for the bribery payments or promises,” colluding with others at CDPQ and Azure to conceal their misconduct, the SEC documents claim. Cabanes did not reply to multiple requests for comment from Bloomberg. 

CDPQ, which oversees C$452 billion ($324 billion) on behalf of pension plans and other accounts in Canada’s second-largest province, has made a number of investments in Azure since 2016, boosting its stake to more than 50%. It invested a total of about $480 million, according to calculations made by Bloomberg last year. 

“When there’s irregularities from a governance standpoint, the action plan is immediate and ruthless from the Caisse,” Charles Emond, CDPQ’s chief executive officer, said in an interview with Bloomberg News in June 2023.

Although the fund has significant losses on Azure, “the reality is that there is still very good assets underneath. There is a plant, a company that distributes electricity to millions of Indians,” Emond said at the time. “Share price is one thing, value is another one.” 

Another Canadian pension manager, the Ontario Municipal Employees Retirement System, is Azure’s No. 2 holder with about 21%, according to data compiled by Bloomberg. Its infrastructure arm bought a stake in Azure for $219 million in a deal announced in July 2021.

Julian Gratiaen, who oversees legal aspects of Omers’ infrastructure assets in Asia, has been on Azure’s board since July. He replaced Delphine Voeltzel, another Omers executive who was on the board from May 2022 until July 2024, according to LinkedIn. 

“The allegations in this indictment are concerning,” an Omers spokesperson said. “The events alleged in the formal charges began before we became a minority shareholder in Azure Power in 2021. Omers is not implicated in any of the alleged conduct and will continue to cooperate fully with the investigation.”

Lastly, Martin Patriquin of The Logic reports that Quebec pension fund rocked by sensational bribery allegations (paid subscription).

You can read the SEC complaint against former CDPQ executive Cyril Sebastien Dominique Cabanes here.

It was deposited Wednesday by the US Attorney’s Office for the Eastern District of New York and if you read that document carefully, it's extremely disturbing and sobering to say the least.

Here is just a small sample of the incredible details:

"SAG", "Mr Big", and so on. 

My jaw literally dropped reading this document which is why you all need to read it here.

Remember when I told you nothing shocks me any longer? 

I take that all back. This is beyond shocking. You simply cannot make this stuff up. 

It should be made into a Hollywood blockbuster movie, that's how bad it is.

The cojones on Cyril Cabanes and his co-conspirators at CDPQ to actually go through this scheme defies anything I've ever seen before.

Not only did they mislead US investors, they reportedly covered up their actions and obstructed justice from the Federal Bureau of Investigation, the Justice Department and the SEC

Cyril Cabanes, 50, Saurabh Agarwal, 48, and Deepak Malhotra, 45 — who are accused of obstructing a grand jury, the Federal Bureau of Investigation (FBI) and the U.S. Securities Commission, in investigations of the alleged bribery scheme.

According to the indictment, the former employees of the Canadian institutional investor, along with a fourth man, allegedly agreed “to delete electronic materials related to the bribery scheme, including emails, electronic messages and bribery analyses.”

Cabanes, who was on the board of directors at Azure Power, has been charged with violations of the Foreign Corrupt Practices Act (FCPA) for his role in the alleged bribery scheme. Cabanes allegedly facilitated the authorization of bribes in furtherance of the scheme while in the US and abroad, as per a complaint by the US Securities and Exchange Commission.

If these allegations are proven true in a court of law, this literally may be the greatest bribery case ever involving a global pension fund.

And unfortunately for CDPQ, it was their employees in India and Singapore that are front and center of this scandal. 

This is a nightmare for Charles Emond and his executive team.

No wonder he and Emmanuel Jaclot who heads up Infrastructure didn't respond to my email early Thursday morning, they knew it was going to hit the fan and that's why CDPQ put out a short statement to all reporters: 

“CDPQ is aware of charges filed in the U.S. against certain former employees. Those employees were all terminated in 2023 and CDPQ is co-operating with U.S. authorities. In light of the pending cases, we have no further comment at this time.”

That has CDPQ's lawyers written all over it and I'm sure top law firms in Montreal and New York are all advising CDPQ on this matter. 

When the SEC, FBI and the US Department of Justice are involved, you don't screw around, you assist their investigation and stay very quiet.

How can this possibly happen? These are professional pension fund managers getting paid big bucks, they know better than to get involved in such a mega bribery scheme.

Well, two quick remarks on that.

Greed knows no bounds and if they got away with it, they would have all made millions.

Second, and more pressing for CDPQ, it exposes serious operational risk at the organization and its subsidiaries.

Over 20 years ago, I used to invest in top hedge funds for CDPQ and had to conduct thorough investment and operational risk due diligence and fraud was a major concern.

For this to occur so easily among three employees, well it just tells me they saw a deficiency in the way things are monitored and took advantage of it.

Yes, they got caught and left the organization but how this occurred in the first place is something that needs to be properly explained to the public (that's the job of senior executives and the board to be frank).

Senior execs at CDPQ have known about this for a while and now that it's public knowledge, they're in full damage control.

Also, who hired Cyril Cabanes? I'm assuming it was Emmanuel Jaclot who has a stellar reputation at CDPQ and across the industry but he too needs to explain how this occurred in his team and why there weren't processes in place to mitigate fraud.

[Note: It might have been Macky Tall who hired him back in 2016 but the scandal happened under Jaclot's watch].

And don't kid yourself, if this can happen at CDPQ, it can happen anywhere, so everyone should be on guard and the heads of Finance should sit down with external operational risk experts to go over their processes and make sure they're air tight to protect against fraud.

I've never met Cabanes but someone I know has and shared this:

I met Cyril a few times when I was at CDPQ. He struck me as inexperienced to be playing in the swamp in India. Clearly, when you combine ambition, inexperience, and probably not enough supervision, it doesn’t end well. 

He was in his early 40s when he was appointed and actually had zero experience in developing countries.  Spent most of his career, until then, on an investment banking desk. Clearly smart but didn’t know what rabbit holes to stay clear of.

Anyway, he is in deep trouble and CDPQ has cut the cord so he is in a boat in the middle of the ocean with no paddle and life preserver. Good luck to him

Good luck to him? More like the hell with him if all these allegations are proven true!

I'm personally sick and tired of these young, slick, investment banking types with high positions at these Maple Eight pension funds who are clearly there for one reason and one reason only.

They're polished, know how to schmooze with bankers and billionaires but they're not worthy of holding such high positions and this is just one example, there are others.

Also, what exactly happened to Anita George, CDPQ's former managing director in India?

I liked her a lot and these sort of things would have never occurred under her watch.

Anyways, I'm rambling and getting worked up because these bribery allegations that are rocking CDPQ couldn't have come at a worse time following the purging at AIMCo.

I can just see government officials all over Canada thinking the same thing: shut down all these foreign offices, fire these high priced employees and repatriate the money to invest it all in Canada.

Of course that would be a stupid strategy but just imagine what Jean-Guy Pépin and Annie-Claude Turcotte in Quebec reading the Journal de Montréal or La Presse are thinking after reading these allegations.

Politicians will have a field day too with this hot potato and Charles Emond will likely be summoned up to Quebec City to answer tough questions.

Not exactly fun for him and the rest of the Maple Eight CEOs can't be happy either.

I remember what CPP Investments' CEO John Graham told me when I met him in Montreal a few years ago: "When one of our peers suffers a black eye, we all do."

I'll leave it at that, this hasn't been a good week for the Maple Eight and another contact of mine told me straight out that CDPQ "should stop posting how many awards and accolades they are receiving on LinkedIn and focus on making high risk-adjusted returns."

A bit harsh but I get his point, enough with the LinkedIn brouhaha! (that goes for everyone)

Alright, let me wrap it up as it's been a long week and I definitely don't get paid millions for all the work that goes into this blog.

I'll remind all of you, my focus is on markets 24/7, this blog is a huge service to all of you and not a charity. I thank those of you who take the time to contribute using PayPal under my picture on the top left-hand side.

Below, Global Mirror episode, anchor Shreya Upadhyaya discusses US charges against Gautam Adani and 10 others. Billionaire Gautam Adani faces bribery allegations in New York, causing massive financial turmoil with ₹2.45 lakh crore wiped off Adani Group's market value in hours. While Adani denies the charges as baseless, the chaos raises questions about the group's strategy to counter the legal and financial fallout in the U.S..

The allegations by US prosecutors raised a political firestorm back home and led to tanking of Adani Group shares. The others who have been accused are Adani Group’s executive Vineet Jain, Azure employees Ranjit Gupta and Rupesh Agarwal, along with ex-employees of a Canadian institutional investor (CDPQ) Cyril Cabanes, Saurabh Agarwal, and Deepak Malhotra.

Also, in this episode of Urban Debate, anchor Shreya Dhoundial discusses about US charges against Gautam Adani and 10 others. Billionaire Gautam Adani and his executives have been accused of paying bribes to obtain solar energy contracts. The allegations by US prosecutors raised a political firestorm back home and led to tanking of Adani Group shares. The others who have been accused are Adani Group’s executive Vineet Jain, Azure employees Ranjit Gupta and Rupesh Agarwal, along with ex-employees of a Canadian institutional investor (CDPQ) Cyril Cabanes, Saurabh Agarwal, and Deepak Malhotra. 

Update: Read my follow-up comment,  CDPQ's trusted man at the heart of corruption plot.

James Bradshaw of the Globe and Mail reports Alberta appoints former prime minister Stephen Harper to chair AIMCo board:

Alberta’s government appointed former prime minister Stephen Harper as chairman of the province’s $169-billion public-sector pension fund manager and added a senior government official to its board, signalling a shift in governance at Alberta Investment Management Corp. and raising questions about its independence.

Mr. Harper is taking the chairman’s role unpaid as part of a revamped board of directors after Alberta’s government dismissed AIMCo’s entire 10-member board and four senior leaders, including its chief executive officer, two weeks ago.

The province also added the deputy minister of Treasury Board and Finance – a high-ranking public servant – as a permanent member of the board, also without pay. That restores a board seat the deputy minister held at AIMCo’s inception in 2008, which was removed a year later

Three other former AIMCo directors, who were dismissed on Nov. 7 as part of the government’s sweeping leadership changes, are returning to the board: Former private-equity executive Jason Montemurro, real estate investor Bob Dhillon and former Healthcare of Ontario Pension Plan CEO Jim Keohane.

Alberta’s government said in an news release the changes are aimed at “restoring confidence” in AIMCo, controlling costs and improving performance. But the new leadership will have to show it can rebuild an experienced and capable executive team to stabilize AIMCo and repair a corporate culture shaken by the sudden dismissals, while maintaining trust with clients and investment partners.

The decision to put a senior government official on the board of the arm’s-length pension fund manager raises questions about AIMCo’s continued independence, and whether the move opens the door to the government to exert greater political influence or to steer the pension fund manager toward government priorities. Current deputy minister of finance Kate White was named to the role in October, 2022, the same month Ms. Smith became Premier.

Provincial Finance Minister Nate Horner said the decision to restore the deputy minister to the board was “more about having a clear line of communication” between AIMCo and the government, and that Mr. Harper agrees.

“There definitely won’t be any political pressure,” Mr. Horner said in an interview.

But opposition politicians raised concerns about whether the change makes AIMCo less arm’s-length.

“The appointment of Stephen Harper calls into question the political independence of AIMCo, and having a deputy minister of finance on the board reinforces that,” Court Ellingson, the opposition New Democratic Party finance critic, said in an interview. “We need to be able to instill confidence with those pensioners that their pensions are not going to be a political pawn in how the Premier wants to use AIMCo.”

Mr. Harper could not be reached for comment on Wednedsay. Ms. White referred a request to Mr. Horner’s office; Mr. Montemurro and Mr. Keohane did not respond to requests for comment. Mr. Dhillon expressed his “full support” for Mr. Harper in an e-mail.

AIMCo is Canada’s sixth-largest pension fund manager, investing money on behalf of 17 clients. The pension plans that account for the bulk of its assets have hundreds of thousands of members in Alberta including municipal and health workers, public servants, teachers, university professors, police officers and judges.

Its mandate says it operates “independently and at arm’s length” from Alberta’s government, though there is “broad cooperation” between them. That mandate includes “full discretion to make investment decisions” for funds entrusted by clients, “free from any influence or direction” by the government.

On Wednesday, Mr. Horner said there could be “minor tweaks” to AIMCo’s mandate document, but its major provisions – including those protecting independence – will remain intact.

Mr. Harper was widely expected to be Premier Danielle Smith’s choice for the chair’s job as the province searched for a permanent replacement for Mark Wiseman who stepped down late last year.

“I couldn’t think of a more well-known and trusted Albertan,” Mr. Horner said, citing the former prime minister’s experience steering Canada through the global financial crisis in 2008 and his more recent work in the investment sector.

Mr. Harper said in a news release that he agreed to be AIMCo’s chair “because I believe it is a meaningful act of public service to my adopted home province of the last 46 years.” He added, “I also feel uniquely positioned to help the organization improve its governance.”

The former prime minister is “a capable guy and will be a very good appointment,” said Ed Waitzer, a lawyer and a senior fellow at the C.D. Howe Institute who serves on a corporate board with Mr. Harper. And Keith Ambachtsheer, director emeritus of the International Centre for Pension Management, said in an e-mail the return of three board members provides “some continuity in the governance of the organization.”

But the various business roles Mr. Harper has taken on since he left government have raised questions about potential conflicts of interest.

He is chairman and CEO of Harper & Associates, his consulting and advisory business, and chairman and co-founder of Miami-based investment fund Vision One, as well as a “working equity partner” at private-equity firm Azimuth Capital, which invests in energy and the energy transition. In addition, he is a director on the boards of Alimentation Couche-Tard Inc. ATD-T – the Quebec-based convenience store giant currently seeking to acquire the Japanese parent company of 7-Eleven – as well as professional services company Colliers International Group Inc CIGI-T.

One of the returning board members, Mr. Montemurro, was previously a partner at Azimuth Capital and is an acquaintance of Mr. Harper’s.

Last year, Alberta’s then-ethics commissioner, Marguerite Trussler, was asked to review Mr. Harper as AIMCo’s potential board chair, and the opinion flagged potential conflicts, according to three sources with knowledge of the advice. And two sources said Mr. Harper attempted to pitch AIMCo on investing in a fund with which he was affiliated.

The Globe and Mail is not identifying the sources because they were not authorized to discuss the confidential process.

“I think that those conflicts need to be resolved,” the NDP’s Mr. Ellingson said.

Mr. Horner said it is “not my role” to manage Mr. Harper’s potential conflicts and that “there’s no special treatment” for the new chair, who he expects will meet the requirements.

One of the most important tasks facing Mr. Harper and the new board will be choosing a permanent CEO to lead AIMCo. On Nov. 8, Mr. Horner appointed the province’s most senior public servant, Ray Gilmour, as AIMCo’s interim CEO – another move that raised questions about how arm’s-length the pension fund manager will be from government.

AIMCo’s chief people, culture and engagement officer, chief legal officer and chief of staff were also dismissed on Nov. 7, and its chief investment officer left in September after less than two years in the role.

“The real challenge is going to be staffing up,” Mr. Waitzer said. “Who is CEO will affect not only their ability to recruit people of caliber, but their ability to engage in meaningful partnerships with other major pension plans and wealth funds. That’s a select group and AIMCo should want to remain part of that club.”

The CEO selection process “will be watched with great interest by both Albertans and by those of us outside its borders,” Mr. Ambachtsheer said.

AIMCo welcomed the appointment of Mr. Harper and the other directors, saying, “their proven expertise will provide important continuity for AIMCo,” in a written statement. “The reestablished board is an important step forward as we continue to work to restore stability to our organization.”

Mr. Horner said rising costs were the main reason the government opted for a reset of AIMCo’s leadership, and he will be “making that clear” to the new board. “There’s an expectation that they continue to be a low-cost provider.

Last week, AIMCo’s former interim board chair, Kenneth F. Kroner, pushed back in a letter to Mr. Horner, saying the government’s claims about costs and performance “are tarnishing AIMCo’s reputation.” He said that third-party data shows AIMCo’s costs “are in the lowest third of the industry,” while the fund manager mostly beat its internal benchmarks for investment performance in recent years.

Ms. Smith has floated the idea of a “hybrid investment approach” in recent media interviews that could allow for the province’s $23.4-billion Heritage Savings Trust Fund – money that AIMCo manages – to chase faster growth, aiming to reach at least $250-billion over the next 25 years. At the same time, she suggested pension plan savings would be invested conservatively.

Ms. Smith said that reaching that goal for the Heritage Fund “requires strong oversight, which [Mr. Harper] will provide.”

The board led by Mr. Harper could also play a key role in a continuing debate about whether the province should withdraw from the Canada Pension Plan and create an Alberta-run alternative. The government contended last year that it is entitled to more than half of CPP assets, and is awaiting an estimate from Ottawa’s Office of the Chief Actuary to estimate Alberta’s rightful share – a figure that some experts predict could be substantially lower than Alberta’s claim.

In 2001, when Mr. Harper was president of the National Citizens’ Coalition and had yet to step into federal politics, he was a co-author of a letter advocating to “build firewalls around Alberta” against encroachments from Ottawa on provincial jurisdiction. The letter proposed that Alberta withdraw from CPP and create “an Alberta Pension Plan offering the same benefits at lower cost while giving Alberta control over the investment fund.”

Barbara Shecter of the National Post also reports Stephen Harper named chair of AIMCo, three directors reappointed:

Former prime minister Stephen Harper has been appointed chair of Alberta Investment Management Corp., a move that has been widely anticipated since the province fired AIMCo’s board of directors and relieved chief executive Evan Siddall of his duties less than two weeks ago.

Three of those board members fired from the province’s $169-billion pension and endowment fund manager were reappointed Wednesday: Jason Montemurro, Jim Keohane and Bob Dhillon. But the Alberta government has also established a permanent board seat, unpaid, for the deputy minister of treasury board and finance, in order “to ensure more consistent communications between AIMCo and Alberta’s government.”

In a statement about Harper’s appointment as chair, Alberta Premier Danielle Smith said the former prime minister will be instrumental in the province’s plans to increase the size of its $25 billion Heritage Savings Trust Fund, which is managed by AIMCo, to more than $250 billion over the next 25 years.

“We’re incredibly fortunate that Mr. Harper has agreed to take on this leadership role with AIMCo,” Smith said. “His appointment, and that of the rest of the board, are a strong step forward in giving all Albertans confidence in the long-term sustainability and success of AIMCo.”

Harper said he was taking the role pro-bono as “a meaningful act of public service to my adopted home province of the last 46 years.”

He said he feels “uniquely positioned to help the organization improve its governance,” and noted that Canadian pensions have a global reputation for their professional operations, upstanding ethics and prudent risk management.

“I want to see AIMCo further embody these values and to positively contribute to this culture,” Harper said in the statement, adding that he is looking forward to working with the new board of directors and AIMCo’s new management team.

The Alberta government, including finance minister Nate Horner, have maintained that the unusual step of firing the board and four members of the management team including Siddall was taken because AIMCo’s costs had risen without commensurate returns.

But former chair Kenneth Kroner disputed that assessment in the letter to Horner and several sources have detailed increasing tensions between the government and the pension management organization over the past year, with many of these sources saying the government made clear it wanted to exert more control over AIMCo.

Horner took over as chair following the board purge, a position he relinquished Wednesday.

Harper left politics after the Conservatives lost the 2015 election to Justin Trudeau’s Liberals, and has been involved in private business ventures since, including becoming a working equity partner at Azimuth Capital Management, an energy-focused private equity firm. He also teamed up with former Carl Icahn protégé Courtney Mather to launch Vision One Management Partners, an activist fund that took on U.S. department store operator Kohl’s earlier this year, according to a Reuters report in February. 

He has also been on the boards of a handful of companies including Colliers International Group Inc., Alimentation Couche-Tard Inc. and Recover Inc.

Keohane, one of the directors reappointed to AIMCo’s board Wednesday, is well-known in the pension world, having successfully led the Healthcare of Ontario Pension (HOOPP) between 2011 and 2020.

Less well known in the sector are Dhillon and Montemurro. Montemurro’s initial appointment to the AIMCo board in March raised eyebrows inside and outside the investment management organization because of his connection to Harper, who was seen as the government’s favoured candidate to chair the board for months following Mark Wiseman’s departure from the role at the end of 2023. Both Montemurro and Harper worked at Azimuth Capital Management.

Naheed Nenshi, leader of Alberta’s NDP Party, said in an interview last week that the choice of Harper might not sit well with some pensioners rattled by the boardroom and executive purge that also claimed three members of Siddall’s team.

“It would take a lot of work for him to convince the financial markets that he is interested in maximum return for pensioners, rather than the creation of a piggy bank fund for the government to invest in projects that it wants to invest in,” Nenshi said.

On Wednesday, the leaders of nine of Alberta’s largest unions representing hundreds of thousands of workers and retirees, wrote a letter to Smith demanding representation on the AIMCo board.

“This is not your government’s money,” the letter said. “It is the retirement savings of nearly 500,000 working and retired Albertans.”

Janet French of CBC News also reports Stephen Harper appointed chairman of Alberta Investment Management Corporation:

Former prime minister Stephen Harper has been appointed chairman of the board of the Alberta Investment Management Corporation (AIMCo), the provincial government said Wednesday.

The Alberta government installed Harper, Canada's 22nd prime minister, as board chair for a three-year term, nearly two weeks after firing all of the provincial investment manager's previous 10 board members, its CEO and three other executives.

The government said at the time the drastic move was a necessary "reset" of the organization.

"Albertans should be grateful and thankful that he would consider doing this," Alberta Finance Minister Nate Horner told reporters in the legislature on Wednesday.

AIMCo manages more than $160 billion in funds, including pension funds and the Heritage Savings Trust Fund. The bulk of the money under AIMCo's control belongs to several public sector pension plans that hold the retirement savings of around 500,000 Albertans.

Premier Danielle Smith has said she wants to transform the Heritage fund into a sovereign wealth fund, and build the $25-billion nest egg into a $250-billion behemoth by 2050.

Harper's appointment prompted critics to question whether investment decisions will be driven by politics, rather than maximizing returns and minimizing risk.

Horner, who temporarily replaced the board chair on Nov. 7, has now stepped out of that role and appointed Alberta's deputy minister of finance a permanent role on the AIMCo board.

Cabinet also brought back three board members who were let go in the Nov. 7 purge: Jason Montemurro, Navjeet Singh Dhillon and James Keohane.

Harper will help guide the asset manager to improve investment returns while keeping overhead costs under control, and develop good relationships with the public sector pension plans AIMCo manages, Horner said.

Harper approached Horner about six months ago, expressing interest in the role, the minister said. Horner previously said he had been worried for some time about AIMCo, as its operating costs rose and returns fell short of benchmarks.

Harper's appointment has nothing to do with the government's musings about pulling out of the Canada Pension Plan to create an Alberta pension plan, Horner said.

In a government news release, Harper said he would do the board work for free, as a "meaningful act of public service" to the province.

"I also feel uniquely positioned to help the organization improve its governance," Harper said .

Critics question Harper's fund-management expertise

Harper was a Conservative prime minister from 2006 to 2015, after leading a united coalition of former Reform Party and Progressive Conservatives members to electoral victory.

Post-politics, he founded Harper and Associates, a consulting firm, and served on the boards of property management, investment and technology companies.

CBC News sent emails Wednesday to Harper and Associates, requesting an interview with the former prime minister. No responses have been received.

Horner said Harper will abide by conflict of interest law and AIMCo's code of conduct, but did not specify how that would affect his other affairs.

Opposition NDP Leader Naheed Nenshi said Wednesday that fund management experience is a specialized skill set, which Harper may lack.

"A board needs to have people who really understand the industry and you need to be able to hire people who can do the job well," said Nenshi, a former business professor.

Nenshi worries the government will direct AIMCo to make investments that meet its political goals, such as bolstering Alberta's oil and gas industry, he said.

Gil McGowan, president of the Alberta Federation of Labour, echoed that concern, saying money in the pension funds belongs to workers and retirees.

"We don't think that any board should be playing politics with the retirement savings of so many Albertans," McGowan told CBC News. "It's not their money and it should not be turned into a political slush fund."

In 2019, the UCP government removed the ability for large public sector pension funds to fire AIMCo as the investment manager, and forced the Alberta Teachers' Retirement Fund to transfer investment control of its assets to AIMCo.

McGowan wants those decisions reversed, he said, adding that unions should be given a seat on the AIMCo board, given how many of their members' pensions are affected by the corporation's activities.

Horner said Wednesday he won't grant either of those requests.

Sebastien Betemeier, an associate professor of finance at McGill University who researches pensions, was reassured to see the government return three AIMCo board members to their roles, as it helps retain institutional memory, he said on CBC Radio's Alberta At Noon.

But he also questioned whether Harper, a partisan figure, is a political appointee acting on behalf of the government, or an independent chair whose sole focus is AIMCo's mission.

In a statement, Alberta Teachers' Association president Jason Schilling said the appointments of Harper and the deputy minister of finance raise questions about the AIMCo board's autonomy. AIMCo manages investment of the pensions of 85,000 current and former teachers.

"These recent decisions are understandably frustrating teachers, who see their pensions being politicized once again by the UCP government," Schilling's statement said.

And Rick Bell of the Calgary Herald reports Harper new AIMCo chair, UCP says it's not about Alberta pension:

First things first. Hot off the press.

As the smart money wagered, former prime minister Stephen Harper has been appointed chair of AIMCo.

AIMCo is the Alberta Investment Management Corp.

AIMCo manages public sector pension funds and the province’s Heritage Savings Trust Fund and the Alberta Pension Plan if ever there was one.

The UCP government says it should get more than $300 billion if the province pulls out of the Canada Pension plan.

In Ottawa, the federal chief actuary has not provided a number of billions they think Alberta would receive.

But Nate Horner, the Alberta government’s finance minister, has got an indication that number is coming soon. He is hoping before Christmas.

‘We are hearing rumblings we’ll have something relatively soon,” says Horner.

“We have heard a few things back about how we can expect an interpretation fairly soon.”

So where does the Harper appointment fit in with the Alberta pension plan, an idea the former prime minister supported a generation ago?

Horner says it doesn’t. Not at all.

“There is no connection between this appointment, the changes we made at AIMCo and a potential Alberta pension plan.

“To be super-clear, we are waiting on the number from the Office of the Chief Actuary. We made it clear to Albertans we wouldn’t move a finger until we get that back and are able to consult with Albertans on what this could look like.

“I never spoke to Prime Minister Harper about it. It has nothing to do with this decision and why we think he’s the right choice.”

Horner reminds us a provincial pension plan would go to a referendum vote.

Just so you know, three members of the old AIMCo board are returning.

The old board was punted along with the AIMCo CEO and three other executives.

Horner is now leaving the board but his deputy minister will be joining the board.

“Prime Minister Harper agrees and thinks this will lead to better governance,” says the Alberta budget boss, Premier Danielle Smith’s point man on the AIMCo file.

Horner is asked another question from the critics who believe Harper will just do the Smith government’s bidding.

“I don’t know if there’s a person in the country who would be more impossible to control and manipulate than Prime Minister Harper.

“I don’t know how anyone could think we could steer him or, even frankly, have the nerve to try. He’s probably the most powerful person willing to take on a role like this.

“His reputation is incredible. I think he’s got a stellar reputation internationally. He is someone viewed as a leader.”

Horner says he’s already heard from many folks who want the opportunity to work with Harper on what the finance minister says will be “a mindset change” at AIMCo.

The province wants a better rate of return on investment and, much more importantly, they want AIMCo to become a low-cost provider.

AIMCo had middling returns, hired more people and were up to 650 employees, paying more in pay and perks while they were farming out more of their work to third parties.

It didn’t add up.

Horner says when AIMCo was asked to explain what was what and why, the explanation was far from satisfactory, and the purge was on.

“He knows why he’s the right guy. He’s got a clean slate to bring in the people he needs,” Horner says, of the former prime minister.

The Alberta budget boss was surprised Harper was willing to consider the job but is grateful he did.

Horner says, “the fit was just natural.”

“I think if you ask him, he sees this as a very noble endeavour, he’s very proud of Alberta, he wants AIMCo to be successful and he wants to see the financial sector grow in Alberta.”

“I think it’s going to be a real point of pride for him.”

What is it about Harper that makes him the go-to pick to oversee the management of investments on behalf of Albertans?

“First and foremost, he’s a proud Albertan. He wasn’t born here but he’s certainly proud to call Alberta home now.”

“I think it’s very different when you go in knowing who you work for and know why this is important and why it’s important to grow the financial sector in this province and diversify the economy.”

“It’s a lot easier when you come in having that, as opposed to trying to learn to understand it. Say you’re coming from down east trying to understand the Alberta culture and identity.”

And Horner thinks investors will come to Alberta with their money and not necessarily insist on hanging out in the most expensive rental real estate in Manhattan.

“You don’t always have to go to them and set up shop in their backyard,” says the Alberta budget boss.

“We can grow the sector here and people are happy to come here, work here and travel to us to invest here.”

So in the end, Horner hands off to Harper, knowing there will be questions.

“He’ll demand the respect of the entire workforce. Alberta will be in a good place for this reset.”

Lastly, Matthew Black of the Edmonton Journal reports Alberta hires former prime minister Stephen Harper as new AIMCo board chair:

The Alberta government has hired former prime minister Stephen Harper as the chairman of the Alberta Investment Management Corporation (AIMCo) board of directors less than two weeks after it sacked all 10 prior board members.

Harper’s hiring was announced via a news release on Wednesday morning in which Harper said he would not be paid for his new role, describing it as a “meaningful act of public service to my adopted home province of the last 46 years.”

“Over several decades, Canadian pensions have earned a global reputation thanks to professional operations, upstanding ethics and prudent risk management. I have accepted the role of board chair because I want to see AIMCo further embody these values and to positively contribute to this culture.”

Harper was born in Ontario but is a longtime Calgary area resident. He served as Canada’s 22nd prime minister between 2006 and 2015.

In announcing Harper’s hiring, Premier Danielle Smith cited her government’s goal of building the Heritage Savings Trust Fund to more than $250 billion in the next 25 years, with more details on how the government plans to make that happen to come before year’s end.

“His appointment … (is) a strong step forward in giving all Albertans confidence in the long-term sustainability and success of AIMCo.”

Finance Minister Nate Horner said he first spoke to Harper about the role “maybe half a year ago.”

“He said that if you would consider me, he would work his channels and see if he thought it was appropriate,” he said, noting Harper’s experience.

“Albertans should be grateful and thankful that he would consider doing this.”

Sudden sackings

AIMCo manages more than $160 billion in investments for 375,000 public-sector employees, with the majority of that money coming from public sector pension plans.

The Financial Post reported last week that the former prime minister was among those being considered to chair the board, and that AIMCo had previously attempted to set up a meeting between Harper and now-former CEO Evan Siddall though the two never met.

Siddall was suddenly removed from his duties by Horner while at an offsite gathering of AIMCo staff at the Westin Hotel in Edmonton after Horner had fired the entire board and installed himself as interim chair.

Siddall had not been accused of any wrongdoing and was not being pushed out by board members since taking on the role in 2021, four sources told the Financial Post.

Horner cited low investment returns and rising operating costs, management fees, and staffing when announcing the firings on Nov. 7, saying, “it was my determination it wasn’t going to change without a major reset.”

Former interim board chair Kenneth Kroner wrote a letter to Horner disputing what he termed an “incorrect narrative” and “misinformation” around AIMCo’s performance that he said will make the next board’s job more difficult.

“The data contradicts the very negative narrative that is out there.”

AIMCo ended 2023 with an investment return of 6.9 per cent, which fell below its benchmark return of 8.7 per cent.

The province’s most senior civil servant, executive council deputy minister Ray Gilmour, was appointed as interim CEO on Nov. 8.

Finance deputy minister appointed to board

The deputy minister of treasury board and finance will now also be a permanent AIMCo board member with the government citing the need “to ensure more consistent communications” between the investment agency and the provincial government.

Opposition finance critic Court Ellingson accused the government of turning AIMCo into a political entity rather than the arm’s-length organization it’s designed to be, adding the appointments send a “horrific message” to investors.

“Albertans don’t want politicians managing their hard-earned assets,” he said. “They expect leaders with proven expertise in managing global pension funds to oversee their future livelihoods.”

Horner defended the appointment as being “imperative” to oversight of AIMCo.

Three of the prior board members were also reappointed to their jobs on Wednesday, with Horner citing their prior work and desire to return — Mainstreet Equity CEO Navjeet Singh Dhillon, former pension plan CEO James Keohane, and tax lawyer Jason Montemurro.

Elections Alberta financial disclosure data shows Montemurro — who was appointed to the board last March — contributed $2,500 to Smith’s successful United Conservative Party leadership bid in 2022 as well as $4,300 to the party in 2023 and another $4,375 as of Sept. 30 this year.

Those appointments also end Horner’s time as interim board chair.

He said no other appointments will be made until they are discussed with Harper.

Alright, there are more articles on AIMCo but I went over the main ones above and highlighted important passages.

What are my thoughts and what is some of the feedback I received?

First, my thoughts. 

I have nothing against Stephen Harper. I voted for him twice before I made the unwise and regretful decision to vote for the Liberals back in 2015 and will never make that mistake ever gain as long as I live.

Harper was an excellent prime minister but toward the end he did become arrogant and it cost him a third term.

In 2010, after two years at the BDC when my contract was up, I did a short stint at Industry Canada where I stayed for a year.

The job wasn't particularly enthralling but there were some good economists there and it was a learning experience (definitely not for someone with a passion for markets).

I did see firsthand Harper's administration micromanaging government departments and can tell you in most cases, it wasn't good or needed.

Is he well respected, does he have an excellent reputation? No doubt. Is he the best choice to chair AIMCo at this time? 

There I have some concerns and will be fair and balanced with my comments.

He's an economist by training and like me, has a Masters in Economics and was definitely a hustler:

Harper attended Northlea Public School and, later, John G. Althouse Middle School and Richview Collegiate Institute, both in Etobicoke, Toronto. He graduated from high school in 1978, and was a member of Richview Collegiate's team on Reach for the Top, a televised academic quiz show for high school students.[5] Harper studied at the University of Toronto's Trinity College before moving to Alberta.[6] In an attempt to establish independence from his parents, Harper dropped out of the University of Toronto and then moved to Edmonton, Alberta, where he found work in the mail room at Imperial Oil.[6] Later, he advanced to work on the company's computer systems. He took up post-secondary studies again at the University of Calgary, where he completed a bachelor's degree in economics in 1985. He later returned there to earn a master's degree in economics, completed in 1991.[7] Throughout his career, Harper has kept strong links to the University of Calgary. Trained as an economist, Harper was the first prime minister with an economics degree since Pierre Trudeau and the first prime minister without a law degree since Joe Clark.[8]

So, unlike our current prime minister, Harper understands basic economics and the primacy of the private sector and that is reassuring.

But it's true that unlike former chairs Mark Wiseman and Kenneth Kroner, he lacks investment experience across public and private markets.

"So what? The guy wasn't appointed chair of AIMCo because of his investment acumen, he can lean on Jim Keohane and others for that. He was appointed chair to clean house, restore governance and improve communications with the UCP.”

Moreover, one can argue Harper gained important market experience after leaving office:

He is chairman and CEO of Harper & Associates, his consulting and advisory business, and chairman and co-founder of Miami-based investment fund Vision One, as well as a “working equity partner” at private-equity firm Azimuth Capital, which invests in energy and the energy transition. In addition, he is a director on the boards of Alimentation Couche-Tard Inc. ATD-T – the Quebec-based convenience store giant currently seeking to acquire the Japanese parent company of 7-Eleven – as well as professional services company Colliers International Group Inc CIGI-T.

All fair points and I have no doubt he will manage any potential conflicts of interest appropriately (he'd be very foolish not to).

The concerns I have are political in nature.

It's unclear from reading the articles above whether he approached Nate Horner or whether the latter approached him six months ago (timeline is important), but clearly the unions/ AIMCo clients are right to be concerned that the UCP is politicizing their pension fund.

And while I'm a conservative and fully support Premier Smith's policies (except for the Alberta Pension Plan blunder which will never see the light of day), I don't think it sends the right message to appoint our former prime minister to be the chair of what is supposed to be an apolitical investment organization.

My fears are justified because apart from Harper, Finance Minister Nate Horner said the decision to (permanently) restore the deputy minister to the board was “more about having a clear line of communication” between AIMCo and the government.

What does that mean exactly? Restore a clear line of communication between AIMCo and government?

Now, I could be wrong, Stephen Harper might set the right tone from the getgo that while government has a seat at the board, there is no government interference whatsoever with the day-to-day activities at AIMCo.

But call me "highly skeptical" on this front and since we know they want to lower costs (which were already low by industry/ peer standards as the former chair and others explained in detail). There will surely be intense debates at the board level on compensation and other activities at AIMCo and the government will have a seat at the table.

In other words, sooner or later, we will know if there is another agenda behind the purging at AIMCo. 

The fact that Nate Horner was thinking about this for months, approached Stephen Harper six months ago, made some accusations that don't stack up to justify the purge, all suggests there is a wider political agenda behind this move.

I also find it highly suspect that the UCP is denying unions seats at the board. 

If the government isn't trying to politicize anything, it should provide members two seats at AIMCo's board of directors just like PSP will soon be doing at its board (it's coming).

We can argue about the pros and cons about giving unions representation on the boards of these large global pensions funds but at the end of the day, it is their pension money and they have a right to have a seat at the table.

Again, I could be wrong and do hope AIMCo survives and thrives after all this but everything that has taken place so far leads me to believe there will be more, not less government interference at AIMCo.

It was reassuring the government reappointed three board members including Jim Keohane who I know and trust but it's a bit unclear to me as to what their role will be and truth be told, I found it strange that Jim and other previous board members accepted to come back after they were abruptly dismissed.

I reached out to Jim for a comment but he said given the media frenzy, he will abstain from making public comments at this time (fair enough). 

He's definitely not a dumb guy, doesn't need this board gig at AIMCo (they need him), so I'm sure something reassured him for making this decision to come back to sit on that board. 

That's a positive and there aren't too many positives in this story as far as I'm concerned. 

Harper and the board's first job will be finding a new CEO, someone who will instill trust and shore up morale at the organization.

I note David Scudellari, Senior Executive Managing Director, Global Head of Private Assets & Strategic Partnerships, is still part of the senior executive and he'd be a great choice at this time.

I also have someone in mind and will share with Jim if the person allows me but he'd be another top candidate because he's fresh, smart and experienced. 

He even shared this with me:

I honestly don’t think it is as dire of a situation as the press is making out. Sure, the abrupt termination of the board and the CEO was dramatic, but Stephen Harper is an extremely smart, accomplished, and thoughtful person and reinstating some of the prior board members shows that the Government is not tribal and is open to bringing back experts like Jim K. and others who can add significant value. 

I expect the Government terminated the board on mass to simplify and expedite the management change - not because they thought there weren’t qualified people serving on it. If they called me and offered me the top job, I would take it. 

They are looking to pivot away from an internationally focused and high cost direct investment model, which is their prerogative and not without global precedents, as there are several successful investors following this ‘endowment fund’ approach. 

Furthermore, it is not as if everyone following the ‘Canadian model’ is hitting it out of the park anymore. The investment landscape has evolved significantly since these funds first adopted this model, so the Canadian funds themselves need to continue to evolve to ensure they have a winning formula. 

Perhaps at this early stage, the changes at AIMCo feel more like revolution than evolution, but I think it is premature to conclude this. If the Government plays its cards correctly, we could have a very happy ending.

Again, this person is highly experienced/ accomplished and he is seeing the positive light here (but admittedly, he also expressed an interest in the top job at AIMCo so he won't criticize the government). 

We shall see how long the process of finding and replacing Evan Siddall will take but in my humble opinion, the sooner they get this done, the better. 

What else? Not all comments were favourable on AIMCo's former execs and the Maple Eight's governance model in general.

One person working at a federal Crown corp shared this with me on the purging at AIMCo:

This is what happens when your "independent" board members stop listening to their key stakeholder.

Let’s also be clear, Board members are never truly independent. The Chair is appointed at the pleasure of the Crown and nominates his/her own directors. What this says to me is AIMCo failed miserably in managing their shareholder.

You look at the Maple 8 boards, it's the who’s who of Canadian cronies. Many have no business being on the Board of a financial institution, let alone a global pension fund making investments all over the world.

This person added:

I told you a long time ago, the compensation party at the Maple 8 is going to come to an abrupt end, their independent governance model will be removed and once the government steps in, it's never leaving. Don't be surprised if other purges happen at other major Canadian pension funds. They pushed the limits on cost/ compensation and should now brace for what comes next.

Now, I don't agree with his criticism especially on boards being stacked up with "cronies" (most of them are highly qualified individuals) but he might be right that in the future, there may be more government interference at Canada's Maple Eight.

I certainly hope not but he makes a good point, the chair serves at the pleasure of the Crown and the CEOs serve at the pleasure of the Board.

All I know is there is increased scrutiny at all our major pension funds and everyone is nervous of what comes next.

Lastly, some friendly advice to Stephen Harper and AIMCo's new/old board.

If I was sitting on that board, I'd push hard for a full, thorough independent performance audit of all investment activities which goes way above and beyond the simple audits Alberta's Auditor General conducts and I'd make that report public.

The tricky part is finding qualified, independent consultants to undertake such a mammoth performance audit but it can and should be done and the report must be made public.

Alright, let me wrap it up as there are other developments that I need to focus my attention on (when it rains, it pours). 

Below, former prime minister Stephen Harper has been tapped as the new AIMCo chair after the Alberta government ousted four of the board's top executives. BNN and CBC report on this.

Lastly, Nate Horner, Alberta’s finance minister and Treasury Board president, held a news conference in Edmonton to share the province’s 2024-25 second quarter fiscal update and economic statement earlier today.You can view that news conference here.

As always, if you have anything to add on this topic, feel free to reach out to me at LKolivakis@gmail.com.

Swetha Gopinath of Bloomberg reports Ontario Teachers' Pension Plan to co-own financial advisor Max Matthiessen:

Ontario Teachers’ Pension Plan (OTPP) agreed to acquire a co-control stake in Stockholm-based financial advisor Max Matthiessen from private equity firm Nordic Capital Ltd.

The Canadian pension fund and Nordic Capital will co-own the business, according to a statement seen by Bloomberg News on Wednesday. Nordic Capital acquired Max Matthiessen in 2020 and will re-invest via Nordic Capital XI, following the exit of its initial investment through an earlier fund. Financial terms were not disclosed.

The deal values Max Matthiessen at about €1 billion (US$1.1 billion) including debt, people familiar with the matter said, asking not to be identified as the information is private.

“We have seen the company grow tremendously over the past four years and some assets are just too good to let go off, so we took the opportunity to re-invest and stay in control along with OTPP,” Emil Anderson, partner and co-head of financial services at Nordic Capital, said in an interview.

Max Matthiessen provides pension, insurance and wealth management solutions for employers, entrepreneurs and individuals. The company has more than 800 employees at 45 locations across the Nordic region, serving over 18,000 corporate clients.

OTPP’s investment is expected to be completed in the first half of next year, according to the statement.

“We see two avenues for growth — one is continued organic growth via cross-selling and boosting areas that are very synergistic with the firm’s life insurance and pensions offerings,” said Iñaki Echave, senior managing director and head of private capital for Europe, the Middle East and Africa at OTPP. “On top of that, we see a lot of runway for acquisitions.”

There’s potential for Max Matthiessen to grow internationally, according to Anderson. “We will be looking in the most near geographical proximities rather than a more broad-based, big expansion into southern Europe.” Nordic Capital, which manages €31 billion in assets, on Monday confirmed it has entered into exclusive negotiations to acquire U.S.-based patent software company Anaqua Inc. from Astorg Partners SAS. It raised €9 billion for Nordic Capital XI fund in 2022, which focuses on sectors including health care, technology and payments and financial services.

Earlier today OTPP issued a press release stating it and Nordic Capital jointly acquired Max Matthiessen, a leading Nordic financial advisor, to drive further growth and expansion:

• New joint ownership will support Max Matthiessen in fulfilling its accelerated international growth plan both organically and through acquisitions
• With its CAD 13 billion financial services private equity portfolio, Ontario Teachers’ will bring additional value creation capabilities and experience in building international insurance distribution and wealth management companies
• The transaction will allow Nordic Capital to further fuel Max Matthiessen’s development, based on the strong platform created over the last four years

Stockholm - Ontario Teachers’ Pension Plan (“Ontario Teachers’”), a major global institutional investor, and Nordic Capital, an experienced Financial Services private equity investor in Northern Europe, today announced an agreed new co-control ownership for Max Matthiessen (“Max Matthiessen” or “the Company”), a leading financial advisor for pensions, insurance and investments in the Nordics.

The new ownership will support the Company’s continued growth and international development. Both investors have a shared vision for Max Matthiessen’s next phase and can draw upon a strong track record of building successful international insurance distribution and wealth management companies.

Max Matthiessen provides pension, insurance and wealth management solutions for employers, entrepreneurs and individuals. It offers advice, analysis, administration and procurement of pension and insurance products as well as investment and asset management solutions. Founded in 1889, Max Matthiessen is headquartered in Stockholm, Sweden and has more than 800 employees at 45 locations across the Nordic region, serving over 18,000 corporate clients. The Company is also committed to sustainable investments, providing its clients access to high-quality ESG-focused products.

With its strong management team and established position as a leading, integrated employee benefits and risk platform, Max Matthiessen is well-placed to build on its growth momentum. This acquisition enables the Company’s further access to long-term capital and sector expertise to accelerate its expansion into international markets both organically and through acquisitions.

Iñaki Echave, Senior Managing Director and Head of EMEA Private Capital at Ontario Teachers’, said: “We are excited to back Max Matthiessen’s management team. Our joint ambition is to consolidate Max Matthiessen as the leading insurance and financial services company in the Nordics, accelerating its growth both in its current markets and verticals, and through synergistic acquisitions. We will leverage our deep expertise in wealth management and insurance services to help the company expand into new markets and adjacent segments, invest in technology and product development, and further enhance its ambitious sustainability programme. We look forward to partnering with Team Max Matthiessen, who share Ontario Teachers’ passion for helping people achieve financial security over the long term.”

Emil Anderson, Partner and Co-Head Financial Services, Nordic Capital Advisors, said: “Nordic Capital is enthusiastic to invest further in Max Matthiessen together with Ontario Teachers’ to allow the company to continue to scale its business model and build on market dynamics in its segment. In 2020, Nordic Capital invested in Max Matthiessen to realise its potential by scaling the Company’s platform, driving growth through investing in the team, modernising the product offering to benefit the individual customer, and exploring selective international acquisition opportunities. Today, Max Matthiessen has strong consistent growth, a platform providing a comprehensive end-to-end solution and a sustainable product offering that attracts a much broader audience. Max Matthiessen is now poised for its next phase of continued international growth, delivering outstanding services to its customers.”

Jacob Schlawitz, CEO, Max Matthiessen said: “We are excited to have Ontario Teachers’ backing the next phase of our development alongside Nordic Capital. This partnership underscores our commitment to putting clients at the heart of everything we do. We are grateful for Nordic Capital’s support, together we have reached significant milestones — expanding our client offerings, driving sustainability, entering new markets, all while staying focused on delivering value to our customers. At the same time, we have been strategically investing in our future by enhancing client value and developing talent, ensuring the company is well-positioned for sustained growth and success. With Ontario Teachers’ joining this partnership, we are excited to leverage their expertise to expand our reach and thereby serve even more clients across both the Nordics and internationally.”

Ontario Teachers’ will acquire a co-control stake in Max Matthiessen through its Private Capital division. Nordic Capital initially invested in Max Matthiessen in 2020 and will now invest via Nordic Capital XI, following the exit of its initial investment through Nordic Capital IX. 

Insurance and financial services are a core sector of focus for Ontario Teachers’, which has direct investments in the sector worth more than CAD 13 billion. The Private Capital team at Ontario Teachers’ has made 14 investments in financial services companies globally, 12 of which it has led or co-led. Recent transactions in the sector include Ontario Teachers’ acquisitions of 7iM, a leading UK wealth and investment manager; European trading and savings platform TradeRepublic; Diot-Siaci, a leading independent European insurance broker operating worldwide; and Westland Insurance Group, one of the largest independent insurance brokers in Canada, through portfolio company, BroadStreet Partners.

With a dedicated sector-focused team, Nordic Capital is an experienced private equity investor in Financial Services in Northern Europe. It focuses on fast growing segments with strong underlying fundamentals such as Savings and Wealth Management, Banking & Lending and P&C Insurance. Over the last six years, Nordic Capital has completed 18 transactions within financial services and financial technology and has deployed EUR 3.3 billion of equity capital in the sector to date. Its current Financial Services portfolio generates EUR 1.3 billion of revenues and employs over 3,200 people. Nordic Capital has achieved success in this sector to date, having developed thriving companies including Max Matthiessen, Nordnet, NOBA, RiskPoint and Qred.

Terms of the transaction were not disclosed. The investment is subject to customary regulatory approvals and expected to be completed in H1 2025.

Houlihan Lokey acted as leading financial sell side advisor.

About Ontario Teachers’ Pension Plan
Ontario Teachers' Pension Plan Board (Ontario Teachers') is a global investor with net assets of CAD 255.8 billion as at June 30, 2024. We invest in more than 50 countries in a broad array of assets including public and private equities, fixed income, credit, commodities, natural resources, infrastructure, real estate and venture growth to deliver retirement income for 340,000 working members and pensioners.

Our more than 450 investment professionals operate in key financial centres around the world and bring deep expertise in a broad range of sectors and industries. We are a fully funded defined benefit pension plan and have earned an annual total-fund net return of 9.3% since the plan's founding in 1990. At Ontario Teachers', we don't just invest to make a return, we invest to shape a better future for the teachers we serve, the businesses we back, and the world we live in. For more information, visit otpp.com and follow us on LinkedIn. 

About Nordic Capital

Nordic Capital is a leading sector-specialist private equity investor with a resolute commitment to creating stronger, sustainable businesses through operational improvement and transformative growth. Nordic Capital focuses on selected regions and sectors where it has deep experience and a long history. Focus sectors are Healthcare, Technology & Payments, Financial Services, and Service & Industrial Tech. Key regions are Europe and globally for Healthcare and Technology & Payments investments. Since inception in 1989, Nordic Capital has invested EUR 26 billion in close to 150 investments. The most recent entities are Nordic Capital XI with EUR 9.0 billion in committed capital and Nordic Capital Evolution with EUR 1.2 billion in committed capital, principally provided by international institutional investors such as pension funds. Nordic Capital Advisors have local offices in Sweden, the UK, the US, Germany, Denmark, Finland, Norway, and South Korea. www.nordiccapital.com.

“Nordic Capital” refers to, depending on the context, any, or all, Nordic Capital branded entities, vehicles, structures, and associated entities. The general partners and/or delegated portfolio managers of Nordic Capital’s entities and vehicles are advised by several non-discretionary sub-advisory entities, any or all of which are referred to as “Nordic Capital Advisors”.

About Max Matthiessen

Max Matthiessen, founded in 1889, is one of the leading financial advisors within pensions, insurance and investment in the Nordic region.  They offer expert advice and guidance on savings, benefits, and insurance to companies and their employees, as well as to private individuals.

Their team of advisors, brokers, administrators, and specialists supports businesses and individuals with procurement, analysis, packaging, advisory services, and the administration of top-tier savings and insurance solutions available in the market. Today, the company employs approximately 800 people across Sweden, Denmark and Norway.

This is another excellent deal for Ontario Teachers' in the insurance and financial services industry.

They partnered up with Nordic Capital to acquire and support Max Matthiessen, a leading financial advisor for pensions, insurance and investments in the Nordics, to help it fulfill its accelerated international growth plan both organically and through acquisitions.

Iñaki Echave, Senior Managing Director and Head of EMEA Private Capital at Ontario Teachers’, featured at the top of this post, summed up the value proposition of this deal well:

“We are excited to back Max Matthiessen’s management team. Our joint ambition is to consolidate Max Matthiessen as the leading insurance and financial services company in the Nordics, accelerating its growth both in its current markets and verticals, and through synergistic acquisitions. We will leverage our deep expertise in wealth management and insurance services to help the company expand into new markets and adjacent segments, invest in technology and product development, and further enhance its ambitious sustainability programme. We look forward to partnering with Team Max Matthiessen, who share Ontario Teachers’ passion for helping people achieve financial security over the long term.”

Teachers' Private Capital has deep expertise in this sector:

Insurance and financial services are a core sector of focus for Ontario Teachers’, which has direct investments in the sector worth more than CAD 13 billion. The Private Capital team at Ontario Teachers’ has made 14 investments in financial services companies globally, 12 of which it has led or co-led. Recent transactions in the sector include Ontario Teachers’ acquisitions of 7iM, a leading UK wealth and investment manager; European trading and savings platform TradeRepublic; Diot-Siaci, a leading independent European insurance broker operating worldwide; and Westland Insurance Group, one of the largest independent insurance brokers in Canada, through portfolio company, BroadStreet Partners.

And so does Nordic Capital:

With a dedicated sector-focused team, Nordic Capital is an experienced private equity investor in Financial Services in Northern Europe. It focuses on fast growing segments with strong underlying fundamentals such as Savings and Wealth Management, Banking & Lending and P&C Insurance. Over the last six years, Nordic Capital has completed 18 transactions within financial services and financial technology and has deployed EUR 3.3 billion of equity capital in the sector to date. Its current Financial Services portfolio generates EUR 1.3 billion of revenues and employs over 3,200 people. Nordic Capital has achieved success in this sector to date, having developed thriving companies including Max Matthiessen, Nordnet, NOBA, RiskPoint and Qred.

All this underscores the importance of having great strategic partners to invest in fast-growing companies all over the world.

Why is the insurance industry so attractive to Teachers'? For the same reason it's attractive to Warren Buffett and other sophisticated and retail investors looking for stable cash flows or dividends from publicly listed insurers.

The insurance industry is going through major transformations and companies like Max Matthiessen are growing fast because they provide highly specialized and personalized products.

Below, Anna-Lena Olsson, Group CIO of Max Matthiessen talks to us about change management, the role of CIOs in shaping strategies, emerging technologies and data and analytics.

Matt Toledo of Chief Investment Officer reports Eduard van Gelderen Appointed Head of Research at FCLTGlobal:

FCLTGlobal, a non-profit that aims to help institutional investors drive long-term value creation named Eduard van Gelderen, former CIO of Canada’s Public Sector Pension Investments, as head of research.

Van Gelderen had joined PSP in 2018 and department in October.

A number of global institutional investors are members of FCLTGlobal, including APG, BlackRock, the California State Teachers’ Retirement System, PSP Investments, Future Fund, and many of the largest asset owners in the world.

“We are delighted to welcome Eduard as our new Head of Research. His extensive leadership experience, deep understanding of long-term investment strategy, and proven track record in shaping sustainable investment practices will be instrumental in advancing our research agenda,” said Sarah Keohane Williamson, CEO of FCLTGlobal in a statement. 

As an organization, FCLTGlobal seeks to promote long-term investing. According to the nonprofit’s website, 90% of executives said that long-term horizons would improve investment performance. Despite this, 50% of executives said that they would delay value-creating projects if it meant missing quarterly earnings targets.

Prior to his role at PSP Investments, van Gelderen was a senior managing director at the University of California and was was previously CEO of Dutch pension manager APG. He is currently chair of the Alternative Investment Management Association Global Investor Board.

Van Gelderen holds a master’s degree in quantitative finance from Erasmus University Rotterdam and a post-graduate degree in asset liability management from Maastricht University. He is a PhD candidate at the international School of Management in Paris.

Last week, FCLTGlobal put out a press release announcing the appointment of Eduard van Gelderen as the Head of Research:

Boston, MA – FCLTGlobal, a non-profit organization that advocates for a longer-term focus in business and investment decision-making, announced today that it has appointed Eduard van Gelderen as Head of Research, effective 15 December 2024.

In this role, van Gelderen will shape FCLTGlobal’s long-term research agenda and define its goals, work with members and staff to advance that agenda, and produce research and communications that extend the organization’s reach and impact.

van Gelderen was most recently Chief Investment Officer of the Public Sector Pension Investment Board (PSP Investments) from 2018 to 2024, where he was responsible for PSP Investments’ total fund portfolio and long-term investment strategy. He also headed the sustainable investment, public policy, global government affairs, and strategic communications functions of PSP Investments.

Sarah Keohane Williamson, CEO of FCLTGlobal, said, “We are delighted to welcome Eduard as our new Head of Research. His extensive leadership experience, deep understanding of long-term investment strategy, and proven track record in shaping sustainable investment practices will be instrumental in advancing our research agenda. We look forward to leveraging his expertise to further FCLTGlobal’s mission.”

From 2014 to 2017, van Gelderen was CEO of the Dutch financial service provider APG Asset Management, after serving as Chief Investment Officer from 2010-2014. Previously, he served as Deputy Chief Investment Officer of ING Investment Management.

Over the past two decades, van Gelderen has published numerous articles and academic papers on fund management and strategy; his work has been published in the Dutch Journal of Investment Analysts, International Investor, ISM Journal of International Business, Investment & Pensions Europe, Journal of Financial Transformation, and Journal of Portfolio Management, among others.

van Gelderen is a certified financial risk manager and a chartered financial analyst and has served on several investment advisory boards; he is the Founder and Chair of the AIMA Global Investors Board. He holds a master’s degree in quantitative finance from Erasmus University Rotterdam and a post-graduate degree in asset liability management from Maastricht University in Limburg. He is currently a PhD candidate at the International School of Management in Paris.

Visit www.fcltglobal.org to learn more.

# # #

About FCLTGlobal

FCLTGlobal’s mission is to focus capital on the long term to support a sustainable and prosperous economy. We are a non-profit organization that develops actionable research and tools to drive long-term value creation for savers and communities. Our members are leading companies and institutional investors. Visit www.fcltglobal.org to learn more.

This afternoon I caught up with Eduard for a drink downtown to chat and see how he's doing.

He looked great, slimmed down quite a bit and was in good spirits.

Eduard is a class act, a real leader with high IQ and EQ and in this business, it's rare to have both.

We didn't dwell too much on what happened at PSP, only told me is he was very surprised to learn about it.

I think the entire pension community in Canada and around the world was shocked. 

I certainly was but nowadays, nothing shocks me.

We discussed events at AIMCo and how political interference flies in the face of the Canadian model.

We both agreed that nothing kills organizational morale as firing your board, CEO and three senior executives and having government bureaucrats manage the fund.

I told him flat out "it makes absolutely no sense" and some of my sources told me Premier Smith has read some of my posts (doubt it but hope she did, not that it will make a difference, the damage is done, nobody in their right mind will go work at AIMCo now).

I also said part of being a pension fund where you need long-term thinking is you also need people with a lot of experience who have been around a while and can make long-term decisions.

When I left PSP in October 2003, the turnover rate was roughly 45%, totally insane, and it wasn't any better when Andre Bourbonnais took over the helm and fired a bunch of people (paying out millions in severance packages).

Sometimes organizational shakeups are needed but sometimes they aren't and only weaken an organization (and if handled wrongly, they kill morale and the culture).

Anyway, enough about PSP, on to Eduard and his new gig at FCLTGlobal.

The headquarters are in Boston but he told me he's not planning to move his young family out of Montreal and for the time being, he will work from here and travel there as needed.

He said he wants to increase the membership geographically to the Middle East and elsewhere and he wants to produce research which isn't academic in nature and can be used by a wider audience.

He also wants to increase the profile of the organization and I told him I'd be more than happy to help as I know about FCLTGlobal but truth is I haven't covered this organization much on this blog over the years (learn about its mission here).

It was founded in 2013 as a joint initiative of CPP Investments (led by Mark D. Wiseman) and McKinsey & Company.

CPP Investments CEO John Graham is the acting chair of the board and it's an impressive board of directors (Chris Ailman, CalSTRS' former CIO is part of it as are many other impressive investors).

Now, I'm not sure what is going on with the CEO search at HOOPP but I'm sure Eduard, Evan Siddall and Marlene Puffer are on the short list.

He didn't tell me anything about that process and whether he was interviewed but did mention HOOPP is a very impressive organization which always did things its way and I agreed.

We also talked about politics and how absurd things have become since the October 7th attack on Israel. We talked about how incumbent governments all over the world are being replaced.

Like I said, Eduard is a rare breed, a real class act, a thoughtful leader, someone with depth and breadth.

I have no doubt he will be a valuable addition to FCLTGlobal as Head of Research and I look forward to covering more of his work there.

Lastly, we did talk about the Canadian model and how it has become somewhat stale as everyone is pretty much doing the same thing and there's very little "innovative" investing nowadays (it's cruise control, manage career risk).

I also mentioned how we can improve governance at Canada's large pension funds and how it's high time we introduce in-depth performance audits but to do this properly, you need knowledgeable people who know how to kick the tires and ask the right questions.

Anyway, fascinating discussion, I'm glad I met up with Eduard for a second time and hope to work with him more closely as he assumes his new role at FCLTGlobal next month.

Below, a deep dive into the renowned Canadian Maple Model with a panel discussion featuring Eduard van Gelderen and other leaders from Canada's top pension funds (January 2024).

Chris Witkowsky of Buyouts reports Canadian giant PSP Investments shops $1 billion-plus portfolio:

PSP investments is shopping a large portfolio of fund stakes that could total up to around $1.5 billion, according to sources and confirmed by the pension system in a statement to Buyouts.

PSP is among several Canadian pensions in the market with a large LP secondaries. Ontario Teachers’ Pension Plan is also out with a potential $1 billion-plus portfolio sale, sources said, confirming an earlier report by Bloomberg.

The processes are part of a wave of LP sales that have driven the market this year to what are expected to be near-record, or better, activity levels. LP sales accounted for about $40 billion, or 59 percent of activity in the first half, according to Jefferies’ half-year volume report.

“LPs tapped the secondary market both to increase liquidity and to reallocate their private asset portfolios; we expect LP supply to further increase in H2 2024 as pricing continues to improve,” the report said.

The rationale for PSP’s sale is for portfolio management purposes, according to a statement the system shared with Buyouts. The system uses secondaries sales “to optimize portfolio construction and further support future investments,” according to the statement.

Portfolio management can generally mean culling managers with which a seller doesn’t plan future commitments, to make space for new relationships; or even selling down exposure to certain managers that has grown too large.

PSP most recently closed a secondaries sale of about $1.5 billion in 2021 with HarbourVest Partners as lead buyer, Buyouts reported at the time.

The system managed about C$264.9 billion in assets as of March 31 across investments in capital markets, private equity, real estate, infrastructure, natural resources and credit. The system’s private equity portfolio had a net AUM of about C$40.4 billion as of March 31, with a five-year annualized return of 14.8 percent, according to information from PSP.

This article was written in late October and it confirms a trend we have been seeing since last year, namely, Canada's large pension funds are tapping into the secondaries market to get rid of underperforming fund stakes to shore up liquidity and diversify vintage year risk.

Go back to read my comments on BCI's Jim Pittman on staying focused, liquid and agile in private equity and it selling $1 billion of PE holdings to Ardian as well as my comments on CDPQ's head of PE on vintage year diversification and managing liquidity and how it used secondaries market to address overallocation.

Jim Pittman, Martin Longchamps and the heads of private equity across Canada's large pension funds have been quietly selling underperfoming stakes at a small discount to free up monies to invest in better opportunities going forward.

The reason they are able to do this is because the secondaries market has matured and is widely used now to manage portfolio liquidity.

And it's been a tough couple of years in private equity and everyone is feeling the pinch.

For example, Texas Teachers' recently stated it will slash $10 billion from its private equity program.

Again, I caution readers not to generalize as Canada's large pension funds have the right approach and are very selective in the deals they enter.

For example, just today, James Bramwell of CPA practice Advisor reports PKF O’Connor Davies to get outside capital from Investcorp, PSP Investments:

PKF O’Connor Davies is getting an infusion of capital from Bahrain-based private equity group Investcorp and the Public Sector Pension Investment Board (PSP Investments), one of Canada’s largest pension investment managers, the Harrison, NY-based top 30 accounting firm said on Nov. 18.

Financial terms of the deal weren’t disclosed. PKF O’Connor Davies said in a media release that the transaction has received regulatory approval and is subject to other standard closing conditions.

The accounting firm said the deal with Investcorp and PSP Investments “represents a significant milestone” that will help “fuel growth and expand service offerings to enhance the overall client experience.”

Much like other accounting firms that have sold a stake in their business to a public equity group, PKF O’Connor Davies said the injection of funding will “elevate its competitiveness and amplify long-term sustainability” and “provide flexibility for increased M&A activity, as well as investing in cutting-edge technology and new service lines.”

Founded in 1982, Investcorp manages $52 billion in assets, including assets managed by third-party managers. Its investment portfolio includes global consulting firm Alix Partners, as well as Resultant, United Talent Agency, and CrossCountry Consulting.

Established in 1999, PSP Investments manages $264.9 billion of net assets as of March 31, 2024, including a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources, and credit investments.

“Since inception, our identity as an organization has been our enduring commitment to service. This investment from Investcorp and PSP further validates that we have an attractive business with a great brand, great talent, and great customers,” Kevin Keane, PKF O’Connor Davies’ executive chairman, said in a statement. “Investcorp and PSP Investments have a long history of backing profitable, industry-leading companies with demonstratable growth avenues and were impressed by PKF O’Connor Davies and the culture that we have built.” 

As ownership rules in the accounting sector have evolved, Investcorp has been seeking the right firm to back, said principal Vitali Bourchtein.

“We were instantly impressed by PKF O’Connor Davies’ leadership team and the exceptional track record of financial performance,” he said. “Providing the organization with additional resources will help accelerate growth and enhance its competitive position in the accounting, tax, and advisory verticals.”

Steve Miller, co-head of North America private equity at Investcorp, added, “In recent years, Investcorp has established itself as a partner of choice for ambitious professional services organizations seeking to grow. Together with PSP Investments, with whom we have a history of investments in the professional services sector, and more than 200 PKF O’Connor Davies partners, we are excited to build upon the organization’s decades of success.”

David Morin, managing director and head of North America private equity at PSP Investments, said PSP “is excited to partner with Investcorp and PKF O’Connor Davies to provide strategic capital and work together in realizing PKF O’Connor Davies’ full potential during their next chapter of growth.”

PKF O’Connor Davies will continue to operate in an alternative practice structure in accordance with applicable professional standards. PKF O’Connor Davies LLP, a licensed CPA firm, will provide attest services, while PKF O’Connor Davies Advisory LLC and its subsidiary entities will provide tax and advisory services.

The accounting firm brought in $377.5 million in revenue during its most recent fiscal year, according to INSIDE Public Accounting.

Capstone Partners served as sole financial advisor, while Levenfeld Pearlstein served as legal advisor to PKF O’Connor Davies. Gibson Dunn served as legal advisor to Investcorp. Weil, Gotshal & Manges served as legal advisor, while McDermott Will & Emery served as regulatory counsel to PSP Investments.

Earlier today PSP put out a press release on this deal stating PKF O’Connor Davies announces a strategic growth investment from it and Investcorp:

New York and Montréal – November 18, 2024 – PKF O’Connor Davies (“PKFOD”) (“the Organization”), one of the nation’s largest accounting, tax and advisory practices, is pleased to announce a strategic growth investment from Investcorp, a leading global alternative investment firm, and Public Sector Pension Investment Board (“PSP Investments”), one of Canada's largest pension investment managers. This transaction represents a significant milestone for PKFOD, adding two experienced investors that will help fuel growth and expand service offerings to enhance the overall client experience. 

This investment will elevate the Organization’s competitiveness and amplify long-term sustainability. The strengthened balance sheet provides flexibility for increased M&A activity as well as investing in cutting-edge technology and new service lines. 

“Since inception, our identity as an Organization has been our enduring commitment to service. This investment from Investcorp and PSP Investments further validates that we have an attractive business with a great brand, great talent and great customers,” said Kevin Keane, PKF O’Connor Davies’ Executive Chairman. “Investcorp and PSP Investments have a long history of backing profitable, industry-leading companies with demonstratable growth avenues and were impressed by PKFOD and the culture that we have built.”  

“In recent years, Investcorp has established itself as a partner of choice for ambitious professional services organizations seeking to grow. Together with PSP Investments, with whom we have a strong investment track record in the professional services sector, and more than 200 PKFOD partners, we are excited to build upon the Organization’s decades of success” said Steve Miller, Co-Head of North America Private Equity at Investcorp.  

“As ownership rules in the sector have evolved, we have been seeking the right platform to back. We were instantly impressed by PKFOD’s leadership team and the exceptional track record of financial performance. Providing the Organization with additional resources will help accelerate growth and enhance its competitive position in the accounting, tax and advisory verticals,” said Vitali Bourchtein, Principal at Investcorp. 

“We are excited to partner with Investcorp and PKFOD to provide strategic capital and work together in realizing PKFOD’s full potential during their next chapter of growth,” added David Morin, Managing Director and Head of North America, Private Equity at PSP Investments. 

Going forward, PKFOD will continue to operate in an alternative practice structure in accordance with applicable professional standards where PKF O'Connor Davies LLP, a licensed CPA firm, will continue to provide attest services and PKF O'Connor Davies Advisory LLC and its subsidiary entities will continue to provide tax and advisory services. 

Terms of the transaction were not disclosed. The transaction has received regulatory approval and is subject to other standard closing conditions. 

Capstone Partners served as sole financial advisor while Levenfeld Pearlstein served as legal advisor to PKF O’Connor Davies. Gibson Dunn served as legal advisor to Investcorp. Weil, Gotshal & Manges served as legal advisor while McDermott Will & Emery served as regulatory counsel to PSP Investments. 

About PSP Investments
The Public Sector Pension Investment Board (PSP Investments) is one of Canada's largest pension investors with $264.9 billion of net assets under management as of March 31, 2024. It manages a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources, and credit investments. Established in 1999, PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal public service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong.  

For more information, visit investpsp.com 

About PKF O'Connor Davies
PKF O'Connor Davies is a top-tier accounting, tax and advisory practice and member of PKF Global, a global network of accountancy firms. We have a long history of serving domestic and international clients. "Know Greater Value" speaks to the confidence and guidance that our clients realize when they work with us. It reinforces our commitment to delivering the highest levels of value, expertise and service in everything we do. Our clients Know Greater Connections, Know Greater Insights and Know Greater Value. "PKF O'Connor Davies" is the brand name under which PKF O'Connor Davies LLP and PKF O'Connor Davies Advisory LLC, independently owned entities, provide professional services in an alternative practice structure in accordance with applicable professional standards. PKF O'Connor Davies LLP is a licensed CPA firm that provides attest services and PKF O'Connor Davies Advisory LLC and its subsidiary entities provide tax and advisory services. 

For further information, visit: www.pkfod.com  

About Investcorp 
Investcorp is a global investment manager specializing in alternative investments across four asset classes: Private Equity (Mid-Market Buyouts, Growth Investments, and GP Staking), Real Assets (Infrastructure and Real Estate), Credit (CLOs, Broadly Syndicated Loans & Structured Credit, and Middle-Market Direct Lending), and Liquid Strategies (Absolute Return Investments and Insurance Asset Management).  

Since our inception in 1982, we have focused on generating attractive returns for our clients and seeking to create long-term value in our portfolio companies by adopting a disciplined investment process, employing talented professionals, and utilizing the resources of a global institution with an innovative approach.  

We invest capital in our products and strategies, aligning interests with our clients and other stakeholders. We pursue sustainable value creation through our investments and in the communities in which we operate and take pride in partnering with clients to deliver tailored solutions for their needs.  

Today, Investcorp manages $52 billion in assets, including assets managed by third party managers. Investcorp has 14 offices in the US, Europe, GCC and Asia, including, India, China, Japan and Singapore and employs approximately 500 people from 50 nationalities globally.

For further information, visit http://www.investcorp.com/ and follow us @Investcorp on LinkedIn, X and Instagram. 

This is a smart deal, co-investing alongside top strategic partner Investcorp to buy a stake in PKF O’Connor Davies (“PKFOD”), one of the largest accounting, tax and advisory practices in the United States, helping fuel its growth.

I like this deal for several reasons, great strategic partner and great company in professional services to invest in over the long run.

As David Morin, managing director and head of North America private equity at PSP Investments (featured at top of this post), said: “PSP is excited to partner with Investcorp and PKF O’Connor Davies to provide strategic capital and work together in realizing PKF O’Connor Davies’ full potential during their next chapter of growth.”

Alright, let me wrap it up there.

Below, OTPP CEO Jo Taylor, Guggenheim CIO Anne Walsh and Mercer CIO Olaolu Aganga took part in a CNBC Delivering Alpha conference last week where they spoke about Finding Alpha over the next four years.

Take the time to really listen to this panel discussion,  a lot of excellent insights and I might come back to it later this week.