OMERS is pleased to announce the official appointment of Blake Hutcheson as President and CEO, effective today. Mr. Hutcheson, currently OMERS President, succeeds Michael Latimer as CEO. His appointment supports OMERS long-term plans for continued global expansion and completes the leadership transition announced in December 2019.So it's official, Blake Hutcheson is now the President and CEO of OMERS, taking over the reins from Michael Latimer who did an outstanding job leading this organization during his tenure.
“Since its founding in 1962, OMERS has lived its purpose as a defined benefit pension plan to meet the retirement income needs of its members which consists of employees of municipal governments and local agencies and boards in the Province of Ontario,” said Mr. Hutcheson. “Right now, many OMERS members are working directly on the frontlines of Ontario’s response to the pandemic. I am deeply honoured and humbled to have the opportunity to work every day for them and all of our more than 500,000 members, and 1,000 employers.”
“It is a privilege to lead this purpose-driven organization. I am blessed to be surrounded by an outstanding, world-class team of deeply committed senior executives who put the best interests of our members above all else. Together, we will position OMERS to meet current and emerging challenges, find new opportunities to grow and deliver on our promise to our members,” Mr. Hutcheson added.
“On behalf of the OMERS Administration Corporation’s (AC) Board of Directors, I want to express our support for Blake as CEO. Throughout my career, I have worked with many successful CEOs, and I cannot think of anyone better suited to lead us at this point in our journey,” said George Cooke, Chair of the OMERS AC Board. “Canadian defined benefit pension plans, such as OMERS, have over time become globally-significant investors, active across various asset classes. In our case, OMERS world-wide investment footprint now stretches from Singapore to Stockholm to Santiago de Chile. This speaks to the strong foundation patiently constructed by Blake’s predecessors and given his more than 10-year track record with OMERS, we know Blake will skillfully build on that foundation, delivering on plans for further expansion,” he added.
Additional Background on Blake Hutcheson:
Blake Hutcheson is now officially President and CEO of OMERS. He is responsible for the overall leadership and performance of the OMERS enterprise. Prior to that, he was OMERS President and Chief Pension Officer. He previously served as President and CEO of Oxford Properties Group from 2010 to June of 2018.
Prior to OMERS, Mr. Hutcheson headed Global Real Estate with Mount Kellett Capital Management, an international private equity firm, and prior to that he was Chairman and President of the Canadian, Latin American, and Mexican operations for CB Richard Ellis, the world’s largest real estate services company.
A former recipient of Canada’s Top 40 Under 40, Mr. Hutcheson is a graduate of the University of Western Ontario. He also completed a Graduate Diploma in International and Comparative Politics at the London School of Economics (with Distinction) and a Master’s Degree in Real Estate Development at Columbia University (from which he received the Distinctive Alumni Award in 2017).
About OMERS:
Founded in 1962, OMERS is one of Canada’s largest defined benefit pension plans, with $109 billion in net assets as at December 31, 2019. OMERS is a jointly-sponsored pension plan, with 1,000 participating employers ranging from large cities to local agencies, and over half a million active, deferred and retired members. OMERS members include union and non-union employees of municipalities, school boards, local boards, transit systems, electrical utilities, emergency services and children’s aid societies across Ontario. Contributions to the Plan are funded equally by members and employers. OMERS teams work in Toronto, London, New York, Amsterdam, Luxembourg, Singapore, Sydney and other major cities across North America and Europe – serving members and employers and originating and managing a diversified portfolio of high-quality investments in public markets, private equity, infrastructure and real estate.
Earlier today, I reached out to Blake Hutcheson but his communications team told me for now, he's focusing on internal communications and when the time is right, they'll reach out to me.
I certainly hope so because OMERS communications have been non-existent over the years, similar to BCI and PSP which admittedly have improved a tad but remain far behind their large peers.
You can't be an $110 billion public pension plan in Canada without a much better external communications strategy, one based on transparency, integrity and accountability.
Just throwing that out there not to criticize OMERS but to state an important point. It's 2020, if you don't own your brand, someone else will. Period. That goes for every major Canadian pension.
Mr. Hutcheson is more of an extrovert than his predecessors so I expect to see him more often and he's a great spokesperson for the organization and very comfortable with media interviews.
He's a real estate expert, used to head Oxford Properties, and I'd love to know his thoughts on my recent comment on a paradigm shift in real estate.
In a nutshell, here is my thinking:
- Working from home isn't everyone's preference but it's here to stay.
- Companies are looking to cut costs and improve productivity and renting large office space is questionable in a post-COVID-19 world.
- Giant tech companies hunting for talent are setting the new trend by allowing their employees to work from home indefinitely, and others will follow their lead or risk being left behind in the talent war.
- Millennials prefer working from home but so do senior partners at law firms and accounting firms who don't want to be exposed to COVID-19.
- There is a fundamental shift going on in terms of the nature of work, working from home will make it easier to hire more women, visible minorities and people with disabilities but it will also make it easier for big companies to offshore high-paying service sector jobs to India, China and elsewhere.
- Working from home is much better for the environment, no question about it.
It doesn't mean offices will be obsolete as you might have to go in from time to time but the reality is these will be sporadic office meetings and controlled to make sure there aren't too many people there at once.
What about isolation and feeling stressed working from home? Just focus on your work and take breaks and make time for your physical health. You should be sleeping better knowing you don't have to get up early to commute to work, and sleeping is very important, as is a healthy diet, exercise and plenty of vitamin D to reduce your symptoms of COVID-19 should you be unfortunate and get infected (minimum 1,000 IUs a day but you can easily and slowly go up to 5,000 IUs a day).
Also, it's incumbent on your manager to check in on you and make sure you feel well and have everything you need to do your work properly. They should display empathy and kindness and understand some people are having a harder time adapting to this new normal.
Anyway, back to Blake Hutcheson. I'm curious to see how he will expand OMERS's global footprint and what changes he will bring about to its strategy in public and private markets.
OMERS was one of the first Canadian pensions to shift a significant portion of its assets into private markets, creating subsidiaries to handle its real estate, infrastructure and private equity assets.
It takes great pride in touting its success in purely direct private equity where OMERS originates deals but its returns in private equity have declined in recent years.
To be fair, PE returns have been declining everywhere in recent years as competition heats up and assets remain overvalued but in the case of OMERS, the drop was significant, something I brought up when I went over its solid 2019 results:
Not surprisingly, Public Equity was the top-performing asset class as stocks came roaring back in 2019 after the huge selloff in Q4 2018.Anyway, OMERS has put out its 2019 Annual Report and it's well worth reading it for details on all asset classes.
Some of you may have noted the S&P 500 gained 32% total return last year, which is correct, but OMERS and other large Canadian pensions don't just invest in US stocks, they invest in global stocks.
In private markets, I note that Private Equity returns fell sharply from 2018, registering a gain of 4.6% last year after delivering a gain of 13.5% in 2018.
OMERS' PE head, Mark Redman, recently departed the organization and was replaced by Michael Graham. I don't know Mr. Graham but someone I trust told me "he's very nice and solid".
I also don't know if Mark Redman's departure had anything to do with the poor showing in Private Equity but one thing I can share with you is OMERS Private Equity always touted its "purely direct" approach and I always found this peculiar.
Importantly, when I look at Canada's leader in Private Equity, CPPIB, its approach of fund investing along with sizable co-investments to lower fee drag, is what makes the most sense to me over the long run in developing a successful private equity program.
And it's not just CPPIB, Ontario Teachers', CDPQ, BCI, AIMCo, PSP, virtually every large pension in Canada that has a successful PE program has gotten it through fund investing and co-investing, not through purely direct deals (they do some but it's a minuscule fraction of their overall PE portfolio, most direct investing comes through co-investments).
Why did CDPQ deliver 10.5% in Private Equity last year while OMERS didn't make half that gain? I suspect because OMERS did a lot of purely direct deals which delivered paltry gains.
To be fair, I need to look at 5-year results but they're not available yet, which is also peculiar. At the very least, OMERS should follow CDPQ and release its 5 and 10-year results in every major asset class, as well as the benchmark results.
I still maintain that CPPIB's and other large Canadian pensions' approach to private equity is the best and it all boils down to a private conversation I once had with Mark D. Wiseman, CPPIB's former CEO.
It went something like this:
Me: Mark, do you invest in purely direct deals in private equity where you originate the deals?And CPPIB has done it successfully over the years which is why its private equity portfolio has grown significantly and that asset class now makes up 25% of all its assets.
MWD: No, we don't and there's a simple reason. Unlike infrastructure where we go direct, private equity requires strong partnerships. If I could hire David Bonderman, I would but I can't afford him so in private equity, we will always invest in funds an co-invest with them on larger deals to reduce overall fees.
Keep in mind, you still need to hire a certain skill set to analyze co-investments (a form of direct investing since you pay no fees) quickly but it's this model which will outlast all other models in private equity and I think OMERS will shift its focus on this model to grow its PE assets (it already does).
Anyway, the new Global Head of OMERS Private Equity is Michael Graham and even though I never met him, I heard very positive things about him from people I trust.
OMERS's real estate subsidiary, Oxford Properties, is run by Michael Turner. Don't know much about him but also heard good things about him and his team.
Mr. Turner and his team have their work cut out for them, as do all real estate divisions at Canada's large pensions. The pandemic has lifeted logistics properties but decimated malls, hotels and is jeopardizing office towers.
In a recent comment, I explained how the Neiman Marcus bankruptcy will sting CPPIB and OMERS:
[...] a Neiman Marcus bankruptcy could spell even bigger trouble for Hudson Yards owned by Oxford Properties, OMERS's real estate subsidiary, and Related:Well, Neiman went under and it directly hit CPPIB's equity stake and will cause problems for Oxford Properties' Hudson Yards.Neiman Marcus' looming bankruptcy is set to be a huge challenge for the ritzy new mall at Hudson Yards, potentially causing a domino effect of departures or lease renegotiations.Real Estate Daily News also reports that Neiman Marcus threatens Hudson Yards Mall:
The luxury department store reportedly is on the verge of filing for bankruptcy protection, and that could be a mean a new lease deal with Related Cos. and Oxford Properties, which own the Hudson Yards mall where Neiman is the anchor tenant, Business Insider reports.
Related and Oxford cut a sweetheart deal with Neiman, paying for a pricey build-out and agreeing to take a cut of the department store's sales in lieu of rent, BI reports. But the wider issue is that some retailers have clauses in their own leases that give them the option to renegotiate or leave if Neiman packs up, according to the publication.
The Shops & Restaurants at Hudson Yards, which opened in March 2019, is closed because of the coronavirus pandemic. Retailers across the country are taking a massive hit from lockdown measures, and landlords say many of their retail tenants have not paid rent, a situation only set to get worse as April melts into May. Related CEO Jeff Blau, who has previously said that tenants who can pay their rent have an obligation to do so, told Bloomberg this week that he foresees a wave of defaults coming.
“Once that ecosystem of rent to expenses to interest to the banks gets broken at one part of the chain, that’s going to become a problem," he told Bloomberg.The anticipated bankruptcy of Neiman Marcus could throw Related and Oxford Properties’ Hudson Yards mall into peril. The move would put the developers in the precarious position of possibly having to renegotiate the retailer’s lease and enter into conversations with other retailers whose lease agreements are tied to Neiman’s presence, BI first reported.As you can see, if Neiman Marcus does file for bankruptcy, it will sting two big Canadian pensions.
- Dig Deeper: The developers provided extremely favorable lease terms as they paid for the majority of the costs for building the store’s interior. They also reached an agreement to take 5 percent of sales instead of rent in the initial three years, and 8 percent in the following two years. The parties were reportedly planning to enter into a traditional rent arrangement starting in the sixth year of the lease.
- E-commerce was already threatening: The brand was considered such a significant selling point that several other stores in the mall reached agreements in their leases that allowed for rent discounts or lease exits if Neiman were to go. Landlords were already losing leverage before the pandemic.
There are a lot of issues in private markets that this pandemic will bring to the forefront.
Luckily, Blake Hutcheson has a very experienced senior team to deal with these concerns but they really need to ascertain how this new normal will impact their portfolio over the long run.
By the way, this isn't an OMERS's problem, it's an industry problem, especially for large Canadian pensions which are heavily exposed to private markets.
It's crazy how public markets keep melting up because everyone believes money printing can Trump a depression.
It can't, especially since government deficits around the world are exploding, something Mark Wiseman brought to my attention on Twitter:
According to #OECD, the world’s wealthiest nations are set to take on at least $17tn of extra public debt as they battle the economic consequences of the #pandemic. How are we going to pay for this?@FThttps://t.co/5WBZcxOwIy— Mark Wiseman (@MarkDWiseman) June 1, 2020
I replied that all that debt needs to be monetized by central banks and it will curb future growth even though you can make an argument that governments should take advantage of ultra low rates to emit more debt.
Anyway, stocks don't seem to care, they were up again today and it's becoming evident the real pain is clearly up as algos chase Nasdaq 10,000:
U.S. stocks rose on Monday to start off the new month amid increasing hope of a successful reopening of the economy. Here's how the major averages performed:— CNBC (@CNBC) June 1, 2020
- The Dow rose 91 points.
- The S&P 500 gained .38%.
- The Nasdaq advanced .66%. https://t.co/4gYsLjvrRrpic.twitter.com/srdFWIaCJk
"The Pain Trade Is Clearly Up": How One Bear Is Hedging The Continued Market Meltup | Zero Hedge https://t.co/S2Il7Up82F— Leo Kolivakis (@PensionPulse) June 1, 2020
But at one point, the real pain felt in private companies will be felt in public companies and it won't be pretty.
Alright, I've rambled on way too much. Congratulations to Blake Hutcheson, I'm sure he will leave his indelible mark on OMERS during his tenure and I wish him and his team health above all and lots of success.
By the way, my favorite Blake Hutcheson quote comes from his 95 year-old-father who lives life to its fullest: "If you don't believe in tomorrow, don't go into business."
Below, earlier this year, Blake Hutcheson, the new CEO of OMERS, talked about staying the course on the fund's investment strategy and how geopolitical issues factor into it with BNN Bloomberg's Amanda Lang.
In April, Blake Hutcheson was part of a Canadian Club panel discussion webinar moderated by Mark Wiseman. Joining them was AIMCo's CEO, Kevin Uebelein, and OTPP's Head of PE, Jane Rowe.
Lastly, in October 2019, Blake Hutchesonjoined PSP CEO, Neil Cunningham, and CPPIB's Senior Managing Director of International, Alain Carrier, and Cathay Financial Holding's CIO, Sophia Cheng for an interesting panel discusion on stewarding long-term assets.