Pension plans must be free to make decisions without political interference at a time when governments are looking to tap retirement pots to meet economic goals, according to a top investor at one of Canada’s largest pension funds.
Maxime Aucoin, head of total portfolio at C$390bn ($306bn) Caisse de dépôt et placement du Québec (CDPQ), said in an interview that it was “essential” for pension plans to retain their independence on how they both allocate funds and pay key staff.
CDPQ, which manages some public pension plans as well as insurance plans, operates independently from the government. It has a dual mandate to maximise returns for more than 6m members while also contributing to Quebec’s economy, providing an example of how pensions must balance sometimes competing priorities.
The plan holds C$68bn of listed and private assets in the province and is the second-biggest shareholder in aviation company and regional champion Bombardier.
Aucoin told the Financial Times that the fund’s focus on governance provided it with “relative independence from the political sphere”. He added that the “beneficiaries of your pension plan are not the government”.
Like many other mega-sized global retirement funds, CDPQ has in recent years reduced its holdings in Canada in preference to diversifying investments across global markets with different growth profiles, with the Asia-Pacific region an area of particular focus.
However, Moody’s cautioned in its review of CDPQ in June that in a weaker economy, the plan could come under political pressure to support Québec “in a way that eroded its ability to achieve the optimal return for depositors”.
CDPQ is far from alone in facing these risks, according to analysts and industry participants.
Blake Hutcheson, chief executive and president of Omers, the C$114bn Toronto-based public pension fund, told the FT “when I look around the world a lot of pension plans are instruments of the government”. Hutcheson also highlighted the importance of independence from political pressure, saying it was something that made many Canadian pension pensions “out-punch our weight class”.
The comments follow a warning from the Paris-based OECD watchdog that the coronavirus pandemic has led to increased political pressures on pension funds.
“Given budget constraints, some governments are calling on private institutional investors, such as pension funds, to play a bigger role in financing the economic recovery,” said Stéphanie Payet, pension analyst with the OECD.
Australia’s government has urged superannuation funds to help cushion the blow from the coronavirus crisis by funding company bailouts.
The UK government last year called for workplace pension schemes, which oversee more than £1tn in assets, to invest more in UK infrastructure projects and early-stage companies to help the country “build back better”.
In June 2021, Alok Sharma, president of COP26, the climate change conference, challenged global pension funds — with a total $47tn under management — to play a leading role in creating a “clean, green and prosperous future”.
“Although there may be room for investing further in the economic recovery, there is a risk that investing domestically, in selected sectors, or in complex financial products may deliver poor value for members, or worse than they otherwise would have gotten from other investments,” the OECD’s Payet said.
