The BC Investment Management Corp., one of the country’s largest pension managers, has laid off “about 20” of its investment professionals, a mix of analysts and portfolio managers who largely worked in equities.It's Victoria Day in Canada so a lot of people are off. I was reading a Bloomberg article on how the hottest market in the world for luxury real estate is sleepy Victoria, British Columbia:
The layoffs, most of which took place in February and affected approximately half of the equities group, have according to sources hurt morale at the organization, which manages $135 billion of assets.
“People are very concerned about their jobs,” said one observer.
Part of the problem was the sudden, and seemingly chaotic way in which the layoffs were carried out.
On the day of the layoffs, a source said, emails were sent advising some staff to go to one location and the rest to another, to hear the good or bad news. But some wound up in the wrong room and had to be pulled out and redirected before the news was delivered.
The decision to cut employees was made a few days after the manager’s human resources department issued a note advising assistance was available to those feeling stressed.
For some employees, stress reduction has apparently come from venting their frustration on the website Glassdoor, a job site that contains reviews of employers. “Terminations and re-orgs are now the status quo,” said a recent anonymous post.
The layoffs have left some wondering how replacements will be found given the relative lack of money management talent in Victoria.
BCIMC has stated its plan is to internalize active management on a global basis, and the investment managers needed — who would most likely have to be recruited from Calgary, Toronto or Montreal — may rethink given what’s happened.
“In a nutshell they’ve treated people like dirt,” noted the observer, adding the approach was “different” from that employed by former chief executive Doug Pearce who left in mid-2014. “Doug had a different philosophy, one that was more of a cultural fit with Victoria.”
One pension fund consultant said if such employee cuts were made by a private sector manager, the clients “would have responded and fired the manager. But in bcIMC’s case, the clients are captive.” In all, bcIMC has 31 institutional clients with almost 98 per cent of the assets being either public sector pension funds or from “government bodies.”
“It’s (essentially) part of the government, but has now added this Wall Street mentality. What’s the board doing?” asked the consultant.
The layoffs are the latest in a series of changes that kicked off almost four years back when Gordon Fyfe replaced Pearce as chief executive. Fyfe was the former chief executive of the $90 billion PSP Investments.
Over time, Fyfe has hired a number of former PSP staffers: of the nine members of its executive management team, three came from PSP, five are long-term employees and one came from a fund outside Canada.
“I think they wanted new people, a bit of a housekeeping exercise,” is how the observer described the personnel and structural changes.
The pension fund’s stated goal of becoming “an in-house asset manager that uses sophisticated investment strategies and tools,” has meant a greater allocation to private equity, mortgages, real estate, renewable resources and infrastructure. In 2016 it launched QuadReal, a real estate manager.
For whatever reason, the fund’s three-year plan of internalizing the investment management and cutting ties with external managers has progressed more slowly than expected.
Last fall, Daniel Garant, a former PSP first vice-president, came on board, an arrival that coincided with the departure of Bryan Thomson, senior vice president of public equities.
Garant is now senior vice-president public markets.
We sought comment from bcIMC on staff cuts, severance costs, morale and progress on the plan to internalize investment management.
“I’m respectfully declining your request as BCI does not publicly comment on or discuss personnel matters,” a spokesperson said.
Victoria was only fifth-hottest based on average price -- up 6 percent to $1.2 million from 2016, with a high of $9 million -- behind Paris; Washington; Orange County, California; and San Diego. But the little city of afternoon teas and lush gardens soared when it came to sales volume and speed, which Christie’s weighted more heavily. The number of sales grew by 29 percent from 2016, while the average time to find a buyer was only 32 days, among the fastest turnover anywhere.Anyway, the folks at bcIMC aren't sleeping well these days. And judging by the nasty reviews on glassdoor.ca, some are downright pissed at its CEO and senior managers (click on images):
I can go on and on but you get the picture by reading all the reviews, there are a lot of very pissed off former and current employees at bcIMC which is now called BCI.
You can dismiss these reviews as coming from a bunch of disgruntled employees but it's not that simple.
You see, while I like BCI's new website and think it's about time they revamped it, I was shocked and dismayed when I read this article and kept thinking to myself: "Didn't Gordon learn anything from his time at the Caisse and PSP?"
Importantly, if the above is true and on the day of the layoffs emails were sent advising some staff to go to one location and the rest to another, to hear the good or bad news but some wound up in the wrong room and had to be pulled out and redirected before the news was delivered, then this is grossly inhumane and a major screw-up on the organization's part (I can just see the employment lawyers having a field day: "Write down everything that happened in detail, don't leave any detail out).
Quite frankly, these type of things should never be happening at BCI, PSP, the Caisse, or any other large Canadian pension fund. They shouldn't happen anywhere, period.
Sure, there are reorgizations and layoffs that take place and sometimes you need to make difficult decisions and cut staff but for god's sake, do it with compassion and empathy, show people the respect and dignity they deserve especially when your cutting their livelihood.
BCI's Board should also take note. I know Gordon told them that he has free rein to hire and fire people at will. In fact, I'm sure that was one of his stipulations for taking this job, but pay attention to the turnover rate and get some exit interviews from former employees to see how they were treated and to see if they were in fact treated fairly and justly (when I was let go from PSP, the turnover was an astonishing 36%, it was just nuts!).
That by the way is the same advice I have for the boards at all of Canada's large pensions because every time I see this type of butchering, it brings back bad memories. You might have good reasons to lay people off but always treat them with respect and dignity.
As for Gordon, he did exactly what I was expecting him to do, focusing on private markets and hiring people from PSP. No shock there and he might have good reason to carry out some of these layoffs but the brutal way they were carried out was unjustified and a major screw-up and it sends the wrong message to BCI's employees, not to mention it kills morale.
That's something Mr. Fyfe needs to own as he travels to India and around the world and so does BCI's Board and senior managers:
Welcomed BCIMC CEO Gordon Fyfe and executives to India this morning. Impressive team. @CanadainIndia @BParrottSTCInd pic.twitter.com/77A2X2nBTw— Nadir Patel (@nadirypatel) November 24, 2015
One last thing, something a friend of mine who almost went to work at bcIMC when Doug Pearce was the CEO shared with me:
I think that Gordon underestimated exactly how small Victoria is.My friend is right, I think Gordon really underestimated how badly this will be received. I certainly hope he learns from this blunder and that he finds a way to boost morale at BCI (no easy task after such a traumatic event).
His predecessor recruited people by telling them that they had to move to Victoria and become part of the community.
When I was approached to join bcIMC, I asked them if I could commute back and forth from Vancouver. The answer was no.
Gordon is breaking that promise (hence, the comment about a Wall Street approach). Funny, he is from Victoria so he should know this. He probably underestimates how badly it will be received.
Folks, this is Victoria, British Columbia, it might be a stunningly beautiful place to live but nobody in their right mind is going to take a job out there where house prices are surging to the stratosphere and live with the threat of being fired at any time.
Lastly, while I take issue with the way this reorganization was handled, I agree with those who argue that B.C.'s pension investments should stay in the hands of pros:
As finance minister in the last B.C. Liberal government, Mike de Jong relished those briefings with the credit rating agencies where he would be asked “tell us about your pensions.”British Columbia's NDP government better stay out of BCI's investment decisions. It's already screwed up with the Kinder Morgan pipeline expansion and now Bill Morneau is looking at Canadian pension funds to save that deal. It might happen but the terms have to be favorable to Canada's large pensions.
The agencies were on the lookout for unfunded liabilities, brought on by politicians granting hefty taxpayer-financed retirement benefits to public sector workers while neglecting to fund those guarantees going forward.
“Happily, that is not the story that we have,” de Jong would tell the analysts. “Our joint custody public sector pension plans are well-managed. They are well-funded and that’s important for people that want to know that the security exists around their retirement future.”
The good news story continues under the current NDP government. When New York-based S&P Global this spring reconfirmed its top-ranked Triple A credit rating for B.C., among the reasons was: “We consider the province’s pension liabilities very manageable and not a risk for B.C.’s finances.”
Here’s Toronto-based DBRS on the same subject: “The province has limited unfunded pension liabilities. As of March 31, these are projected to be $187 million, one-tenth of one per cent of gross domestic product. Unfunded pension liabilities are expected to remain low.”
The most recent edition of the audited financial statements of the province indicate that, far from falling short of obligations, three of the four public pension plans are overfunded.
For the main pension plan for provincial public servants, assets totalled 106 per cent of obligations. The plan for municipal workers weighed in at 104 per cent and the one for college and university employees topped out at 103 per cent.
Only the teachers’ pension plan lagged, with assets matching only 97 per cent of obligations, a shortfall of $372 million. As the plan, like the other three, is joint trusteed, the liability is shared equally between teachers and provincial taxpayers, needing a top up from both.
“The pension story doesn’t attract a lot of attention here in B.C.,” as de Jong noted in one of his briefings near the end of the Liberal term of office, “but it is a very positive one and one that distinguishes us from circumstances that exist in many other jurisdictions around North America.”
While basking in the glory of fiscal responsibility, he ought to have acknowledged the debt to the previous NDP government and the public sector unions. Together in the late 1990s, they engineered the current fully-funded joint trusteeships.
Ironically, the current NDP government was called to account this week over reports that the current plans are significantly invested in the fossil fuel industry.
Holdings include Kinder Morgan, developer of the Trans Mountain pipeline expansion, which the B.C. New Democrats oppose. As noted here recently, the B.C. pensions also have a stake in Cheniere Energy, the U.S.-based rival to B.C.’s hopes of developing a liquefied natural gas industry.
When Premier John Horgan was challenged about his own MLA pension and others in the public sector being partly invested in Kinder Morgan and other fossil fuel companies, he didn’t deny the optics.
“It may raise a few eyebrows,” Horgan conceded to reporters Tuesday. “Often times this looks bizarre to the public.” He also made the point that the plans are managed independently — and managed well — by professionals working for the B.C. Investment Management Corp.
BCIMC is jointly overseen by the unions and government. The unions fill a majority of seats on the seven-member board of directors, which hires the management and shapes the investment policies, so the government could not by itself bring about a change of direction.
There’s been talk of the New Democrats and unions working together to shift toward more progressive investment strategies. However the pension corporation is already active on that score.
“As we believe that companies that manage environmental, social and governance (ESG) matters perform better over the long term, we integrate responsible investing into our approach and processes across all asset classes,” writes CEO Gordon Fyfe in the covering letter to the corporation’s latest report on responsible investing.
Rather than simply divesting as some activists prefer, BCIMC prefers to seek change by engaging directly with companies via its holdings in their shares.
With Rio Tinto and Suncor Energy, BCIMC joined other investors in successfully supporting “proposals that called for additional disclosure relating to the companies’ exposure to climate change risks.” With Anglo American mining, it backed a requirement to report annually on the resiliency of its business model under different climate change scenarios for 2035 and beyond.”
More quixotic was backing a proposal that did not pass, calling on the Potash Corporation of Saskatchewan “to assess its human rights responsibilities related to sourcing phosphate rock from Western Sahara.”
The investment corporation joined others in defeating excessive compensation and bonus schemes at Canadian Pacific Railway, Crescent Point Energy and BP. “Our primary focus is on pay for performance,” to quote the responsible investing report.
BCIMC’s performance in managing $135 billion worth of assets — witness the testimonials of the auditors, the actuaries and the credit rating agencies — has made its executives and managers among the highest paid in the public sector.
All that could change if more politically-active folks in the government and the unions decided to remake the board and its investment strategies.
An activist takeover could also risk returns on investments, which is why it would be wiser to keep the job with the professionals and out of the hands of the politicians.
Below, discover Victoria, British Columbia. My aunt and uncle are visiting from Crete and they stopped off there before heading to Seattle to see my nephew. They said they loved Vancouver and particularly loved Victoria. I'm sure it's a beautiful place to visit, not sure I'd want to work there.
Enjoy your Victoria Day and for the folks that were laid off at BCI, close the chapter, focus on your health, move away and find a job somewhere else. It's not going to be easy but that's my best advice.