Now, IMCO and Craig Ferguson.
He's doing his job and a good job and he's right:
"Our program is designed to continue to grow with a focus on investing consistently across vintage years' of private equity while seeking attractive risk-adjusted returns, investing alongside our best-in-class partners with deep sector expertise."You need to diversify by sector, geography, vintage year and co-invest alongside world-class partners to reduce fee drag in good and especially bad times.
Every major pension fund in Canada has roughly the same approach (OMERS is a bit more unique doing more direct deals on its own in recession proof industries).
They invest in "best-in-class" PE funds all over the world and co-invest to reduce fee drag.
Craig Ferguson even gave an exclusive interview to Buyouts on how rocky fundraising may help normalize PE model.
A note to IMCO's communications, when you agree to these exclusive interviews, make sure you provide a link on your website where your clients and the public can read it for free (like OTPP does).
It's insane how these industry publications get away from charging ridiculously high subscription fees for content that should be free to pension fund clients and the public.
What else? A few months ago, I learned that the investment in Peloton Capital Management was not Craig Ferguson's decision but came straight from the top.
I covered Peloton's differentiated approach back in 2019 when I was working in the Advisory group at KPMG (don't get me started on that short stint, I knew Compliance would kill that gig) and think highly of the founders Steve Faraone, Mike Murray (both formerly at OTPP) and Stephen Smith, the billionaire businessman who backed their seed fund up (my boss at KPMG, a nice guy, "suggested" I cover PCM on my blog, so I did and that comment zipped through Compliance, shocker!).
It's a solid fund, they're doing well and have recently announced the first close of PCM’s second fund (PCM Fund II) with C$425M in aggregate commitments.
But there's no way you can tell me that IMCO didn't have better options to invest in than PCM!
It helps when Stephen Smith can make one phone call to Ed Clark (Bert Clark's father) or a former OTPP CEO and get an allocation from IMCO.
"Who cares Leo, good for them, they got the allocation and have to perform like other PE funds or else they're toast!"
Absolutely true, but I am a stickler for unflinching, comprehensive transparency and top governance, and if I went to IMCO's Chair Brian Gibson and Bob Bertram (two highly regarded veterans of the pension industry) and told them exactly what I'm saying here, namely, it wasn't Craig Ferguson's decision to invest in Peloton Capital Management, they'd have "no comment".
But I would ask IMCO's Board to look into these allegations and take them extremely seriously.
Again, this may turn out to be a great long-term investment and a great long-term relationship, but that's not the point. It pisses me off when billionaires use their clout to get favors from public pension funds.
I don't know Stephen Smith from a hole in the wall, have no interest in meeting him, but if he was in front of me right now, I'd tell him straight out: "You might be a highly regarded and successful billionaire but don't ever use your clout to gain favors from public pension funds."
And let me be crystal clear, it wasn't Craig Ferguson who shared this with me, it was someone else who has nothing to do with IMCO.
Something about that PCM allocation doesn't smell right to me and the truth should come out (those guys never contributed a dime to my blog but that has nothing to do with the truth).
As George Carlin once stated: "It's a Big Club, you and I aren't part of the Big Club."
I also added an important update to that comment stating the following:
I completely forgot to mention that IMCO's former head of Infrastructure, Tim Formuziewich, who joined the organization in 2019 to lead IMCO’s infrastructure investments and was featured in this IPE Real Assets article on grand designs for battery storage, left last year to join Squared Capital as a Managing Director.
Squared Capital is a leading global infrastructure investment manager which closed its ISQ Global Infrastructure Fund III at the $15 billion legal cap last April, exceeding an initial target of $12 billion.The problem? Tim Formuziewich directed hundreds of millions in Squared Capital when he was in charge of Infrastructure at IMCO and then crossed over to become a Managing Director there.
Tim is an excellent infrastructure investor but that should have never been allowed, part of governance 101 and reminds me of my time at PSP when André Collin joined Lone Star Funds after investing billions in that fund (just literally joined after collecting his $2 million bonus at PSP and nobody said a word!).
Let me be blunt: IMCO has a big governance problem. Their governance has more holes than Swiss cheese and it stinks, really stinks!
I reached out yesterday to IMCO's Chair Brian Gibson privately on LinkedIn to discuss these matters and asked him to call me. So far, CRICKETS!! (Brian did reach out Friday morning and we exchanged messages on LinkedIn, which I will keep private).
Now, Brian Gibson did reach out to me and was nice enough to give me his personal cell for people who contacted me to contact him to discuss. I did tell them about this and they told me they will decline to contact him (no kidding).
This week, I got some more people reaching out, telling me IMCO's governance is a lot worse than I think.
One person called me and said this:
"Bert Clark's father, Ed Clark, former CEO of TD Bank and strong Liberal supporter, was the most senior financial advisor to former Ontario Premier Kathleen Wynne, he helped Bert get the job of President and CEO at Infrastructure Ontario and then the top job at IMCO. They didn't even have a competition for the top job at IMCO, it was given to Bert who had no experience working at a pension fund."
I (somewhat curtly) replied: "And? The whole world knows this! Tell me something I don't know!"
They went on:
"Well, what you don't know is that Ed Clark not only handed his son the top job at IMCO, he ensured that the governance was set up in a way so that Bert Clark can never be touched. It's a staggered Board so Premier Doug Ford cannot get rid of Bert Clark without removing all Liberal appointed Board members one by one and that can take another 6 years! Also, one board member, Vincenza Sera, was handpicked by Ed Clark to Chair IMCO's Nominating & Governance Committee. She has been there from the start and in my experience runs interference for Bert and tries to ensure that anyone appointed to the Board is supportive of him. The same goes for Eric Tripp, he too sits on IMCO's Nominating & Governance Committee and makes sure Board members are supportive of Bert."They continued:
"At IMCO, the entire senior management team, except for the CEO, has been replaced over the past four years.And the CEO has attracted only one new client - a key part of his mandate. How does he survive if none of the original people he hired have stayed and he hasn’t attracted new clients? The answer is he’s protected by Vincenza Sera, Head of Governance and Eric Tripp. They both block and tackle for him."
They added:
"They both are puppets in my view but difficult to replace given they are appointed by other organizations and board member’s terms are staggered. You should try to speak to Chair Brian Gibson or the former CIO, CRO, COO or head of private markets—all gone. Bet Gibson’s frustrated by now. Entire senior management team has turned over in last few years; and the organization has failed to aggregate meaningful assets (it’s raison d’etre). It’s a bust. But CEO with no asset management experience keeps his job and pulls down an excessive pay package. And the Head of Governance and Nominating committee does nothing but defend him.
Ms Sera is a director and Chair of the Nominating and Governance Committee of Investment Management Corporation of Ontario. She served on the Board of the Ontario Pension Board for 13 years, including nine as Chair of the Board. 9 years as chair of OPB…clearly a poster child for good governance."
More concerning, they said: "There is quite a bit of tension on that Board and it's always between Ms. Siera and Mr. Tripp and Brian Gibson and others."
Well, that caught my attention, so I looked up who Vincenza Siera and Eric Tripp are and sure enough, they are both key board members of IMCO's Nominating & Governance Committee and Ms. Siera has been there from the beginning of IMCO in 2017:
Now, I don't know if this person has a personal beef with these two IMCO board members but they do raise a good governance point, namely: How are IMCO Board members appointed? By whom and for how long?
I personally think no board member anywhere should be allowed more than two consecutive four year terms, if not three year terms. I want to see an independent panelappointing them not the Premier's office.
I am so sick and tired of political BS, it makes me sick to my stomach and reminds me of Greece, my ancestral home.
When my father left Crete over 60 years ago to do his internship in psychiatry in Chicago, he worked his tail off there. He decided to move to Montreal because he liked the research centers here and married my mom, had three children, lived in a modest apartment on l'Acadie in Park Extension, saved his money to put down 25% to buy a house in Town of Mount-Royal in the early 1970s.
Like many immigrants of his generation, nothing was given to him, they had to experience racism from Anglo Quebecers who ruled Quebec back then and it wasn't always easy.
But my father like so many others persevered, worked 50 years at the Allan Memorial Institute and retired last year. My younger brother wisely followed his steps and is a very busy practicing psychiatrist, affiliated with the Neuro.
My older sister received her law degree from University of Montreal, then a Masters in Air & Space Law from McGill and decided to move to Greece to work at the Canadian embassy in Athens and then move to Crete where she teaches and is married with one boy.
I remember asking my father why he sent his three kids to French private school (me at Collège Notre-Dame, my brother at Brébeuf where he had Justin Trudeau as a classmate and my sister at Villa Ste-Marceline).
My father told us: "As long as you live in Quebec, I want you to learn the language and culture properly and respect them. Consider yourselves fortunate to have this opportunity."
I also remember one day coming back from high school after taking the bus, my dad had come home late around 8 p.m., finished eating supper, and I approached him: "Dad, most of my classmates are driving now, they have cars, one of them, Sebastien who you know, even drives his dad's 911 Porsche to school."
My dad asked me to go get my brother, so I did, all excited.
He then made me say what I said to him and then looked at us: "As long as you're living under this roof, your mother and I will provide you with free food, clothes, and we will pay for your education as long as you do well. And a bus pass, that's it that's all!"
Okay, that was the end of that! No Porsche 911 for me, not even a Pinto or beaten up Chevrolet!😁
Where am I going with this? Some of us don't have Ed Clark or Stephen Smith as a father, all we have are our values and education and that's it.
My father (and mother) carried me through hard times when I was diagnosed in MS and when I was wrongfully terminated from PSP. I owe him more than I can possibly describe here and so do all of you who read this blog for free.
Now, it's my turn to take care of him, which I do diligently and without hesitation and with great joy.
Anyone who has met my father says nothing but good things about him and he will tell you his faith sustained him in good and bad times.
He also told me a long time ago: "Are you sure you want to go in the finance industry? One of my former patients was a big bond trader in the 80s, kept referring to his wife as 'the bitch' and kept saying 'doc, in my business, you're only as good as your last trade, they don't give a shit about you'."
Yup, I chose the world of finance because I studied economics and math at McGill and did all my pre-med courses and philosophy with Charles Taylor as electives."
I was basically a masochist which is how I ended up here.
Why am I sharing all this personal stuff with you?
Because I have tremendous respect for Ed Clark, he was a great CEO, he was the only big bank CEO with the brains and fortitude to stay away from asset-backed commercial paper (ABCP). He didn't buy or sell this garbage when all this peers were making money hand over fist doing so."
But if these allegations are true, Ed Clark did a great disservice to his son and I will tell him so in his face if I ever meet the man.
Bert Clark isn't a bad guy, he's actually nice when you talk to him, he's pretty bright, understands the macro and foundations of pension investing, but the truth is he got this job because of his father and he has made a lot of "rookie" mistakes and has managed to survive somehow.
I do not wish Bert any harm in writing this, it's kid of difficult being "the son of Ed Clark" because people always look at you like "what the hell have you done by yourself?" and "you'll never be as successful as your father."
I'm sure Justin Trudeau feels the same way (for good reason).
But Bert is able to forge his own path and he has to learn to stop micromanaging people at IMCO and respect governance above all.
That means when Stephen Smith tells Jim Leech to call you and tell you to look at Peloton Capital Management, you do NOT go to your private equity guy and say "have a look at these guys, I heard they're really good."
That is just wrong, wrong, WRONG!!!!
And it's not just Bert Clark and IMCO, there are real governance issues at all of Canada's large pension funds that infuriate me.
"Canadian model, we are the poster children of good governance"
This is total and utter bullshit and I'm fed up of it.
The dirty little secret at Canada's large pension funds is there are quite a bit of governance lapses and they gloss over them to protect their brand and reputations, but we all know what I'm talking about.
From Mark Wiseman going to BlackRock, to Andre Bourbonnais joining him there, to Andre Collin joining Lone Star, to Mark Jenkins and Macky Tall joining Carlyle, to Steve Faraone and Mike Murray leaving OTPP to form Peloton with Stephen Smith as their anchor investor, to BCI helping to seed Searchlight Capital and Erol Uzumeri, another OTPP alumni, to Henri-Paul Rousseau, Christian Pestre and Luc Verville landing at Power Corp, AIMCo, and Fondaction after the 2008 ABCP blow-up, and on and on and on.
There is so much BS going on at Canada's large pension funds,it literally make me sick to my stomach.
[Note: In the US, no pension investment manager can work at a fund they invest with for a minimum period of three years after they leave that pension fund. Governance 101!!!]
What else makes me sick to my stomach? How OTPP interviewed me and two other highly qualified candidates to apply to the Senior Managing Director, External Managers Group and we all got the same email from June Melton of HR at (almost) the same time, stating the exact same generic message:
Hi Leo;
I hope this message finds you well. I just wanted to follow up regarding your interest in the Senior Managing Director – External Managers Group opportunity. At this time we have concluded all of our first round discussions with candidates and have selected a very short list to move forward in the interview process. At this time, although we remain very impressed by your experience, we have opted to progress with alternative candidates at this time.
Thank you very much for your interest and participating in our recruitment process.
Wishing you the very best,
June
What the hell? What a bunch of total OTPP BS!!!!
I've got nothing against June Melton or Gillian Brown, Head of Capital Markets at OTPP who is super smart and easily one of the best people to succeed Ziad Hindo in CIO position when he walks away.
I really enjoyed my discussion with Gillian but I'm really wondering what a sham operation they're running at OTPP if the two people I know and I were not part of the short list.
Back in 2002, when at CDPQ, I listened to Ron Mock's sermon on how OTPP invests in hedge funds and while Ron impressed me, the way he invested in hedge funds did not impress me at all.
Truth be told, Ron Mock loves listening to Ron Mock and he blew a lot of "cutting edge" smoke up my behind and thought I fell for it.
And here is another truth: while Ron Mock was an "ok" CEO (nothing great), he made a HUGE blunder not keeping Neil Petroff as CIO and bringing in Graven Larsen to replace him. HUGE! It ended up costing him his job and Jo Taylor is a much better leader but has made some mistakes too, like bringing in Karen Frank to run Equities (she's finally gone!!).
And since I'm on a roll, let it be known that Gordon Fyfe didn't resign from PSP to go back to BC and nor did Andre Bourbonnais, they were both pushed out, Gordon for testing the "compensation limits" and Bourbonnais because he ran PSP like his personal fiefdom, creating a lot of needless chaos and anxiety there. Neil Cunningham was brought in to settle things down but Neil lacked vision which was why he was also asked to step down.
Capiche? There is no CEO who resigns on their own, they are forced to resign, end of story.
Kevin Uebelein and Dale MacMaster, AIMCo's former CEO and CIO, didn't "resign", they were asked to leave after AIMCo's vol blowup in 2020.
Leo de Bever didn't resign from AIMCo, he was bumped out because someone wanted him out (the problem with Leo is he thinks he's the smartest guy in the room, which he usually is, and he said the same thing to me about Brian Gibson).
Kevin Uebelein was a nice guy but had no business whatsoever running AIMCo and I still maintain Dale MacMaster was a great CIO but that he rightly took the fall for that vol blowup, they both did.
But don't feel bad for them, they both walked away with millions in compensation, all part of a severance package Mark Wiseman, AIMCo's Chair, calls "industry standard" (euphemism for pay to shut people up).
And I've even got a beef with Jim Keohane, HOOPP's former CEO who is now a director at AIMCo and Trans-Canada Capital, who sent me this last year when I wrote about CPP Investments' out of control compensation:
I wanted to comment on the issue of pay at the large Canadian Pension Plans. These are my own personal views.
The Canadian pension model has been successful largely because it is built on a strong foundation of good, independent governance which allows the funds to operate like a business and act in the best interest of the plan members. The ability to pay market wages to attract high quality investment management professionals is the key to being able to manage the funds using an internal management team.
Internal management is very much in the best interest of members because it affords the lowest cost of implementation and enables a much wider scope of investment opportunities and among other benefits, allows for much more effective risk management.The alternative is to outsource the investment management function which is what we observe with many of the large US state pension plans. The principal reason why the US state plans use outsourcing is because their governance models are fraught with political interference which makes it almost impossible for them to pay market wages to internal portfolio managers. So instead, they write much larger cheques to outside managers to run the money. The overall implementation cost, which is what a business should be focused on, is much, much higher.It is also important to understand that market forces - the supply and demand for portfolio managers, is what sets the wages that the Canadian pension funds pay. They don’t just decide to pay higher wages. They pay what they need to pay to attract the talent they need to produce the good results they have produced over the past couple of decades. There is a very high demand for investment professionals who have shown an ability to outperform markets. Investment organizations globally are willing to pay very high compensation to these individuals.There is a strong governance processes and oversight around compensation at all of the large Canadian pension plans. Third party experts are used by all Canadian pension plan boards to ensure that the compensation methodologies and the quantum of pay is in line with market practice.Canadian pension funds have produced some of the best returns globally over the past couple of decades. The ability to pay market compensation levels in order to attract and retain the talent needed to manage their funds internally has been a cornerstone of this success.Tampering with the very successful governance model of the Canadian pension plans would be a huge mistake.
Jim, between you and me, I don't buy this crap of "supply and demand for investment talent." I know for a fact that top people I recommend to pensions are routinely shunned and they are top of the top!
I also know for a fact if anyone at Canada's venerable Maple Eight had to trade to survive and write a daily blog like I do, they would NEVER survive on their own, NEVER!!
Not Jim Keohane, not David Long, certainly not Gordon Fyfe or Derek Murphy who used to head Private Equity at PSP.
Derek Muphy, "Muph", had the personality and charisma of an old wet towel, kept complaining incessantly to me about his compensation at PSP: "They better pay me big bucks or I'm walking"
So walk Murph! I'd love to see you, Gordon and Andre Collin in my world, you would all die!!
And so would most of you reading this, including Bert Clark, Ed Clark and Stephen Smith.
These people do not know what pain and suffering is all about, what it means to fight for your health and every basis point, they live in an alternate BS universe.
So please spare me already with how great the governance is at Cnada's Maple Eight, Nine, tyen, Eleven, there are so many holes in there, I wouldn't know where to begin!
The same person who got me started on all this also told me CPP Investments invested in Radical Ventures and Ed Clark is one of the partners: "You might also ask yourself how these guys get CPP as one of their largest LPs despite having zero track record. Until you look at the partners…iconic technology investors :)"
This person also warned me: "Leo, Ed Clark and Stephen Smith are very powerful people, I do not want my name out there as they can harm my business."
I replied: "No problem, I'm not scared of them one bit because I learned to survive on my Cretan balls and brains, don't give a rat's ass who they are and if they dare come after me with lawyers, I will rip their testicles off and shove them through their nostrils and out their back side!"
That's not me talking tough to score points, I mean it, I'm fed up with BS and as far as OTPP, you can bet your asses I will ask Jo Taylor and Ziad Hindo the exact performance of external managers in 2022 and total cost in fees.
As for who OTPP will hire to be their next Senior Managing Director, External Managers Group, my buddy in Toronto is convinced they have an internal candidate and they did "this whole dog & pony show to appease their Board."
What a total sham and waste of our time! I asked June Melton in the interview why didn't they go through a headhunter firm and she told me "the cost is about $500,000 for a search at his level."
Not that headhunters are any better, most of them are terrible, they have a list of their favorites and recommend them and do not bother really meeting candidates face to face to get afeel for them and really dig into their personalities.
I told my buddy in Toronto: "They're paying $350,000 base salary and up to $150,000 in bonus, so they're not getting any superstar to fill that position."
He agreed and told me "maybe they need to fill DEI criteria and hired an internal black or Asian woman."
I replied: "Good if that's the case, but what better person to hire than Leo Kolivakis, 26 years of progressive MS, went head to head with Ray Dalio and spent an hour talking to Gillian Brown giving her all sorts of ideas I can now publish on my blog?"😁
In all seriousness, I am worried about OTPP's, CPP Investments', CDPQ's and PSP's external hedge fund programs. I'm confident OTPP will have the best financial results for 2022 among the Maple Eight, but that program must have lost big money and I will ask Jo and Ziad details about it.
And I want to make it clear, all the candidates I know have nothing but good things to say about Gillian Brown, Head of Capital Markets at OTPP (and June Melton of HR). She is one of the best and hardest workers at Canada's large pensions and I see great things in her future (deservedly so).
Alright then, let me wrap it up there as my sciatica is killing me again (three goddamn weeks in a row!) and I feel like killing myself because the pain is unbearable (I'm sure a lot of people reading this wish I went through with it but rest assured, Mr Pension Pulse is A LOT tougher than you think and MS and sciatica will not set him back!).
Below, The Empire Club of Canada Presents: Ed Clark, Group President and CEO, TD Bank Group: Final Major address as TD's CEO.
Mr. Clark, whenever you and Stephen Smith come to Montreal, please email me and I'd be glad to meet up for you for lunch at Milos (on your tab) and will tell both of you the good, bad and downright ugly of Canada's pension governance model. Just don't bring your lawyers to that meeting, you'll regret it.
And one of my favorite skits from the late great George Carlin, so apt for this post because BS is the glue that binds the great Maple Eight pension governance model together!