British Columbia’s giant pension fund manager has named federal pension executive Gordon Fyfe as its next chief executive officer, saying it wanted a new leader with experience in global investment deals.Don Curren and Ben Dummet of the Wall Street Journal also report, British Columbia Investment Management Names New CEO:
Mr. Fyfe, 56, has been CEO of the Public Sector Pension Investment Board in Ottawa for the past 11 years. PSP Investments manages $90-billion in pension assets for employees in the federal public service, and is Canada’s fifth-largest pension fund manager.
He will move to Victoria to become CEO of B.C. Investment Management Corp., which has $114-billion in assets and is Canada’s fourth-largest pension fund manager. BCIMC manages pension assets for public-sector workers in the province, and also oversees public trust funds and public insurance assets.
Mr. Fyfe will replace Doug Pearce, who has led BCIMC for 26 years and announced his plans to retire last August. Mr. Fyfe will take over on July 7.
BCIMC board chair Rick Mahler said Mr. Fyfe was born and raised in Victoria, where BCIMC is based, and most of his extended family is still in B.C. His two sons also are in high school and university in the province.
“We were looking for a Canadian, and not only did we get a Canadian, we got somebody from Victoria,” Mr. Mahler said. “He grew up here, and he went to [the University of British Columbia]. He wanted to finish his career in British Columbia.”
BCIMC has been increasing its focus on global investment opportunities, and announced Thursday it earned a 14.7-per-cent rate of return last year after increasing its weighting in non-Canadian stocks. The fund has announced plans to open offices in London and Singapore to expand its global investment portfolio.
Mr. Fyfe worked for J.P. Morgan in New York and London and also previously worked in France, helping him develop a global network of contacts. Mr. Mahler said asset managers worldwide are seeking out new investment opportunities around the world, and developing strong partnerships with other global fund managers is key to being included in deals.
“Gordon has had a philosophy of developing partnerships in various countries around the world, and he has been very effective in using those partnerships to ferret out transactions,” Mr. Mahler said.
BCIMC said Mr. Fyfe will also carry on the fund’s mandate to invest in a socially responsible manner. The B.C. fund has been a high-profile proponent of responsible investing and Mr. Pearce frequently spoke publicly about policy reforms to improve corporate governance in Canada. He is a former chair of the Canadian Coalition for Good Governance, a powerful lobby group of institutional investors.
Mr. Fyfe has had a lower public profile on policy and governance issues, but Mr. Mahler said the organizations that rely on BCIMC to manage their funds expect BCIMC’s commitment to responsible investing to continue.
British Columbia Investment Management Corp., one of several big Canadian pension funds that have become high-impact players in global markets, said Gordon Fyfe is taking over as chief executive and chief investment officer.You can read the press release bcIMC's put out here as well as the press release PSP Investments put out here.
Mr. Fyfe comes from another big Canadian fund, the Public Sector Pension Investment Board, where he served as president and CEO.
BC Investment Management, which has $114 billion Canadian dollars ($106 billion) under management, invests on behalf of public-sector pension plans, public trusts and insurance funds.
Mr. Fyfe takes over at BC Investment Management on July 7 from Doug Pearce, who was at the helm for more than 20 years.
"His experience is crucial as (BC Investment Management) seeks to expand its global reach and continues to implement its current business strategy," the fund's chairman, Rick Mahler, said in a release.
PSPB said in a news release that its board will enact a "pre-established CEO succession plan" and that further details will be announced soon.
The new leadership at BC Investment Management is the latest in the changing of the guard this year at some of Canada's biggest pension funds.
Michael Latimer took the helm of Ontario Municipal Employees Retirement System, which oversees C$65.1 billion in pension assets, in April from Michael Nobrega after servicing as chief investment officer. In January, Ron Mock was appointed chief executive of Ontario Teachers' Pension Plan, succeeding Jim Leech. Mr. Mock had previously headed fixed income and alternative investments for the C$140.8 billion fund.
Canada's biggest pension funds have become some of the biggest and most agile investors on the global stage, diversifying their traditional exposure to public equities and bonds into real estate, infrastructure and private equity in a bid to augment long-term returns that match up with their pension liabilities.
The BC pension fund doesn't have as high a profile as some of Canada's biggest funds, led by Canada Pension Plan Investment Board, Quebec's Caisse de Depot et Placement du Quebec and Ontario Teachers'.
Still, the fund is an active investor in alternative investments, including exposure to timber production, water and wastewater production, energy transmission and real estate.
A spokeswoman for the BC pension fund couldn't immediately be reached for comment.
On Friday afternoon, I was watching France demolish Switzerland in World Cup soccer when a former colleague of mine from PSP sent me an email to tell me about the move. I told him I wasn't surprised and think this move was planned for quite a while (even before Doug Pearce retired). Gordon was born and raised in Victoria, British Columbia, his family is there and he really loves it out there. (My dad visited Vancouver two years ago and told me it's breathtakingly beautiful. Gordon's wife, Lucie, daughter of the famous Jean Campeau, is from Montreal which is why he moved here and raised their four kids here).
One thing I can tell you is that Gordon is not going to bcIMC to boost his compensation. PSP's senior executives enjoyed some very hefty payouts last year (Gordon made the most, a cool $5.3 million) and I suspect they received equally hefty payouts in fiscal year 2014 (PSP's annual report is made public around July 21st after Parliament approves it and two weeks after Gordon starts his new job). I defended these hefty payouts based on PSP's excellent fiscal year 2013 results but as I discussed in PSP's tricky balancing act, this compensation is extreme and public pension fund managers shouldn't be paid better than private sector fund managers (read this comment for my thoughts on comp at Canada's large public pension funds).
British Columbia is a peculiar place when it comes to compensating its public servants. Doug Pearce, the former CEO/ CIO of bcIMC received a lot of negative press for his compensation but the truth is he and Michael Sabia at the Caisse are among the lowest paid CEOs at Canada's large public pension funds (they both made roughly $1 million in total comp last year, which is nothing to scoff at). I am sure Gordon will be paid more than Doug Pearce and he'll try to change compensation while at bcIMC but that is a battle he will lose (in many ways, B.C. is more socialist than Quebec!).
So what can I say about Gordon Fyfe? I met Gordon at the Caisse back in 2002 when I was working with Mario Therrien's hedge fund group allocating money to external hedge fund managers. I was overseeing a $400M portfolio of directional hedge funds made up of L/S Equity, CTAs, global macros and a few funds of funds. Every week I would attend a meeting with internal portfolio managers covering global markets and discuss the views of our hedge fund managers.That's where I met Gordon and he left a good impression on me because he was asking tough questions to portfolio managers on their forward looking views.
In September 2003, three months after I got married, Mario Therrien fired me for "insubordination". I was receiving all sorts of pressure from Richard Guay, the then Head of Risk, to open up our book on funds of funds. I knew Mario was going to fire me and told Guay about it but he and Pierre Malo (who was then supervising Mario) didn't intervene to help me when the axe fell (Mario made many foolish managerial decisions back then and let go of really good people and kept the weasels on his team).
Angry, distraught, and worried, I called Gordon who had just moved over to PSP. He immediately reassured me: "Forget about the Caisse and Mario Therrien, you're coming to work for me." I was Gordon's first investment hire at PSP (his first hire was Liette Richard, his loyal executive assistant from his days at TAL). It took him less than a day to hire me. It drove Danielle Morin, the former CFO at PSP, nuts as she was a stickler for process. Her style clashed with that of Gordon's which was why she got sacked and quickly replaced by John Valentini whose wife worked with André Collin at Cadim and who was just appointed as the interim president & CEO at PSP (he has moved up since being grilled in Ottawa after PSP lost a ton a dough in FY 2009 buying ABCP and selling CDS).
Moving over to PSP, I got a substantial raise (was grossly underpaid at the Caisse) and a nice office near Gordon. He even helped me negotiate my exit at the Caisse and coached me on what to say when I met Henri-Paul Rousseau, the Caisse's former CEO, to argue why I was wrongfully dismissed and deserved my full bonus, which I was entitled to because of the performance of my portfolio (to his credit, Henri-Paul gave me my bonus).
The first few months at PSP, Gordon was getting the lay of the land. He had a lot of meetings with peers and I actually accompanied him on some of these meetings, including one with Ron Mock, Ontario Teachers' new CEO. We also met with some external managers, including Ray Dalio of Bridgewater. In that meeting, I pressed Dalio on deflation, and he blurted out: "Son, what's your track record?!?"
Gordon got a real kick out of Dalio's response and kept teasing me all the way back home. In fact, Gordon loved teasing me and I often teased him right back. For example, when I would roll into the office at 9:15-9:30, he would say "good afternoon Mr. Kolivakis" (I'm not a morning person and hate breakfast meetings but I stayed late). I would snap back: "What's your problem? Did you have your morning tea and bid on your cheap shirts from Land's End?"
From the start, Gordon's priority was to shift PSP's assets into private markets and to hire qualified people to run these teams. He first hired André Collin to head real estate, which was already an established asset class at PSP. I never really liked Collin, nor did I trust him (he was a blowhard with his own agenda), but Gordon needed someone to expand real estate investments, and Collin was his guy.
Collin took all sorts of risks in opportunistic real estate to trounce his bogus benchmark (CPI + 500 bps), made millions in bonus, and then took a few members of his team and magically joined Lone Star, a fund which he invested billions with at the Caisse and PSP. At Lone Star, he was first president of Americas and was recently promoted to the new position of president of the entire fund. All this was never mentioned in the Auditor General's Special Examination of PSP (that shady stuff makes my blood boil!).
Around the same time, Gordon quickly moved his attention to private equity and hired Derek Murphy, who he worked with at J.P. Morgan and who he trusted as a close friend. I remember when Gordon came to my office to tell me I had to help Derek with the board presentation on private equity. I told him I had no idea about private equity but he didn't care. "Leo, you're the best analyst, I can throw you anywhere and I know you will deliver. You got less than two months so get to work."
Gordon also warned me: "Murph (Derek Murhphy) is a special guy with a peculiar character so don't get flustered." That was an understatement! I've worked with a few Irish hardasses in previous jobs but Derek was in a league of his own. Most of the employees at PSP were either scared of him or couldn't stand him because he was grumpy and very direct (if he didn't like your face, you knew it).
But I actually got along well with Derek and liked his direct, no bullshit style and cynical sense of humor (we are similar in that way). We worked well together on his board presentation and we met quite a few GPs and LPs, including Mark Wiseman, CPPIB's CEO who was then head of Ontario Teachers' private equity fund group responsible for investments and co-investments. I learned a lot about private equity in that brief stint. Derek built up a great team, hired an amazing guy -- his buddy from Newfoundland, Jim Pittman -- and despite his initial rough managerial style, he settled down and has delivered outstanding results in private equity. He also became a multi millionaire in the process and enjoyed the spoils of the "best gig in the world."
Gordon then shoved me in infrastructure to work with Bruno Guilmette, the head of that asset class. I did the same thing all over again, a bunch of research, talked to some GPs and LPs and helped Bruno with his board presentation. Bruno is a quiet guy but he assembled a good team made up mostly of former Caisse (PSP is full of former Caisse employees) and eventually delivered decent returns (infrastructure is a very long-term asset class). One of my favorite deals was when PSP bet big on airports and bought a stake in Athens' airport (Bruno should hire my buddy, an infrastructure expert with operational experience, and bid on the new airport in Crete and other assets which the Chinese are eying now).
Anyways, once my stints in private equity and infrastructure were over, I was bounced to work with Pierre Malo, who had left the Caisse where he was in charge of currencies to join PSP as Head of Research and Asset Mix. Pierre then hired another analyst, Mihail Garchev who is still working at PSP as the Senior Director for the Office of the CIO.
Together, our small team produced a lot of research but the group never took off in the direction that Pierre wanted and there was a lack of direction in Public Markets between our group and the one headed by Bernard Augustin. I was very worried about a lot of things, including my job, because people were being let go at an alarming pace (turnover rate reached 36% at one point, which is crazy for a long-term pension fund).
In September 2006, I pleaded with Gordon to have breakfast with me. There, I told him flat out that while Pierre is a nice guy, Bernard is a better manager of people and we lacked much needed direction in Public Markets. But I also warned him about research I was conducting on the U.S. housing market, CDOs and that our group had serious concerns with the risks Bernard's group were taking in their credit portfolio which was then managed by Jean-Martin Aussant.
It was too late. By then my fate was sealed at PSP. Some senior managers wanted me out and they were setting me up for a major fall. In October 2006, three years after I joined that organization and right after I was promoted, Pierre Malo fired me (he Gordon and Derek orchestrated this over many months and the psychological abuse I endured over those months was unconscionable).
I remember that day very well because it was the second worst day of my life (the first being when I was diagnosed with MS back in June 1997). Once again, I felt angry, betrayed and distraught. How can these guys fire a good guy delivering outstanding results and struggling with Multiple Sclerosis? And worse still, as I recount here, my hell with PSP was far from over.
Till this day, I think what they did to me was inhumane, disgusting and quite frankly, downright stupid because it was immoral and illegal (Crown corporations and government organizations have a duty to accommodate persons with disabilities and they can't fire people on a whim). My lawyer, Denise Workun, an employment lawyer who specializes in discrimination, urged me to take my case all the way to the Canadian Human Rights Tribunal and protect my interests, saying "you've got a great case and it's highly unlikely you will ever find another good paying full-time job with benefits."
But I decided against this course of action for two reasons. One, I despise lawyers and the case would have dragged on for years and taken its toll on my physical and mental health. More importantly, I was still somewhat loyal to Gordon, even after all the crap PSP put me though, and I didn't feel right taking them to court (months later, he privately thanked me).
Now, after reading the above, you might think I hate Gordon Fyfe and PSP. In fact, everyone is convinced of this but nothing can be further from the truth. I enjoyed working at PSP (for the most part) and Gordon gave me unbelievable opportunities to work across public and private markets, learn a lot and present my findings to the board of directors. No other senior analyst has my experience across public, private and hedge fund investments, which I used to build the best blog on pensions and investments.
Someone from bcIMC emailed me late Friday afternoon to ask me what to expect of Gordon Fyfe. I told this person that Gordon's focus will be primarily on private markets and he might even bring people from PSP to help him (wouldn't be surprised if Derek and some in his team move over there). He will likely give "Brother André" (André Collin) at Lone Star a huge allocation and reward him for being "a great real estate investor" (insert roll eyes here).
I also told this person at bcIMC that like any leader, Gordon has his strengths and weaknesses but there is no doubt in my mind that the folks at bcIMC are extremely lucky Gordon is their new leader. Despite his giant (and fragile) ego, Gordon Fyfe is an exceptional leader who instills confidence and will fight hard for his employees. And unlike others, he's very approachable and down to earth, which is part of his affable character (just don't share too much with him). He's a hard worker, demands a lot from himself and his employees, but first and foremost, he's a family man and knows the importance of work life balance (he would have breakfast meetings but rarely any lunch meetings because he hit the gym at lunch).
You should also know there was a time when I was very close to Gordon. In fact, I lived right down the street from him. He often gave me lifts back home where we talked shop, joked around, and I got to hear all sorts of stories on how Jean-Guy Desjardins made him very rich when TAL was sold to CIBC, how he lost money managing a bond portfolio at J.P. Morgan (that was a short stint) and how he met his wife and how much his four children mean the world to him (I saw him interact with his kids and he's a great dad).
I'll end by sharing something else. One cold winter evening, Gordon and I took the train back home because of a huge snow storm. As we walked through Pierre-Eliott Trudeau park in the center of town here in Town of Mount-Royal, I had to stop several times because my legs were blocking and my MS symptoms were acting up. I just couldn't walk and was frustrated and embarrassed. I told him he didn't have to wait for me. He looked at me and said: "Don't worry man, take your time, and if I have to, I'll carry you home."
That is the Gordon Fyfe I prefer to remember, the guy who believed in me and stood by my side no matter what. It's a shame he put me under Pierre Malo and didn't protect me, keep me and watch me thrive at the Office of the CIO, but that is a choice we both have to live with (me more than him).
Below, a rare interview with Gordon Fyfe, bcIMC's new CEO and CIO (click here if it doesn't load). Gordon, I wish you much success at bcIMC and hope you learned a lot from your successes and failures at PSP. Stay healthy, keep smiling, bring out the best in your people and don't fly too low under the radar (come out of your shell more often). Also, take the time to meet me before you depart and subscribe to my blog, you owe me that much.
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