Finance and Economics；Canada's pension funds
Canada's public pension funds are changing the deal-making landscape;
They own assets all over the world, including property in Manhattan, utilities in Chile, international airports and the high-speed railway connecting London to the Channel tunnel. They have taken part in six of the top 100 leveraged buy-outs in history. They have won the attention both of Wall Street firms, which consider them rivals, and institutional investors, which aspire to be like them.
These giants are Canada's largest public pension-fund groups. They manage around C640 billion dollar(643 billion dollar) between them. Of the 40 largest public pension funds in the world, four are Canadian, according to Preqin, a research firm (see table). America aside, no other country has more on the list. But size is not what marks them out. Their approach to investment is intriguing.
Unlike those in charge of public pension funds elsewhere, the Canadians prefer to run their portfolios internally and invest directly. They put more of their money into buy-outs, infrastructure and property, believing that these produce higher returns than publicly traded stocks and bonds. They are in some ways like depoliticised sovereign-wealth funds. Jim Leech, the boss of Ontario Teachers' Pension Plan, calls them a “new brand of financial institution”. And as public pensions around the world cope with painfully low yields on their assets, many see them as a template. Michael Bloomberg, New York City's mayor, is among the model's admirers.
和其它掌管公共养老基金的机构不同的是，加拿大人更喜欢在内部经营他们的投资组合以及直接投资。他们把资金大量投在并购，基础设施和房地产领域。因为他们坚信这些领域方面的投资回报大于公共股票与债券方面的投资回报。他们有点类似于去政治化的主权财富基金。安大略省教师养老金计划负责人Jim Leech把它称为“金融机构的新品牌”。世界上其它为之收益甚少而头疼的养老基金把加拿大养老基金视为榜样。纽约市长Michael Bloomberg正是这种模式的推崇者之一。
Ontario Teachers pioneered this style of investing in the 1990s when it brought more of its investments in-house. Other large funds soon followed suit, building up teams to handle deals on their own. The Ontario Municipal Employees Retirement System (OMERS) wants to have 90% of its assets managed internally by the end of 2012,leaving some room for allocations to external managers in specific areas.
The funds will do smaller deals alone but often act as “co-sponsors” with leading private-equity firms on bigger transactions. This allows them to have more control over the investment and to save on fees. CPP Investment Board and PSP Investments, for example, worked with Apax, a buy-out firm, to acquire Kinetic Concepts, an American medical-devices company, for 6.1 billion dollar. It was one of the biggest buy-out deals in 2011.
The main draw of the Canadian model is cost savings. Running operations directly helps plug “the incredible leakage that goes out through fees” to pricey external managers, says Gordon Fyfe, the boss of PSP Investments, a large fund. In private equity, for example, many managers charge a fee equal to 2% of assets and 20% of profits. Hiring staff and building up internal capabilities costs far less. Keith Ambachtsheer of KPA Advisory Services, a pensions consultancy, says running assets internally costs a tenth of what it would if they were outsourced.
加拿大模式最引人注目的地方是成本低廉。一家名为PSP的大型投资基金的老板Gordon Fyfe指出，直接管理业务能够节省本该支付给外聘经理的高昂费用。例如，对私募股权来说，多数经理人的佣金相当于资产的2%和利润的20%。雇用员工和打造内部能力的成本远远低于经理人的费用。KPA咨询公司的养老金顾问Keith Ambachtsheer认为，与外购相比，资产的内部化运营成本仅为外购成本的十分之一.
There are other advantages. Public pension funds have a longer investment horizon than private-equity firms, so the Canadian behemoths can choose to sell when the time is right, mitigating some of the risks of investing in illiquid assets. In December, for example, Ontario Teachers announced it would sell its majority stake in Maple Leaf Sports and Entertainment, a large Canadian sports business, for around C1.3 billion dollar. They had been invested in Maple Leaf since 1994, far longer than a private-equity firm's typical five-year horizon, and are expected to get a return of five times their money.
Because they are saving so much on fees and only need to meet the liabilities of scheme-members' pensions, moreover, the Canadian funds feel less pressure to chase the high returns that leading buy-out firms do. They can pursue investments with less risk and leverage. “Because returns don't have to be as good, they can bid more for companies,” says one buy-out boss. It sounds like a loser's lament.
So far the funds' strategy has paid off. Over the past ten years Ontario Teachers has had the highest total returns of the biggest 330 public and private pension funds in the world. Some of this outperformance stems from the relative strength of Canadian stockmarkets and property, to which Canadian pension funds have higher allocations than others. But not all of it. In 2010 OMERS returned 25 dollar on every dollar spent on internal management, for instance, compared to only 10 dollar for every dollar spent on external managers' fees.
Those seeking to understand how Canadians have pulled it off are given two answers: governance and pay. There is little political interference in the funds' operations. They attract people with backgrounds in business and finance to sit on their boards, unlike American public pension funds, which are stuffed with politicians, cronies and union hacks.
Just as important is their approach to compensation. In order to recruit the best executives, Canadian pension funds have ensured their pay is competitive with Bay Street, Toronto's version of Wall Street. They pay a base salary, annual bonus and long-term performance award (which many pension funds elsewhere do not) to make their employees take a long-term view of investments. Mr Leech of Ontario Teachers made over C3.9m dollar in 2010; 51% of that was a long-term performance award, 36% his annual bonus and only 13% of his base salary. He would doubtless earn more on Wall Street, but this is a huge pay packet by public-pension standards. Anne Stausboll, the boss of CalPERS, the largest American public pension fund, made around 380,000 dollar in the year to June 30th 2011, including a 96,638 dollar bonus.
同样重要的是他们的薪酬体系。为了招募到最优秀的高管，加拿大养老基金保证他们支付的薪酬在Bay Street（加拿大的华尔街）是最具竞争力的。他们支付的薪酬包括基本工资，年终红利以及长期绩效奖金（这是其它养老基金没有的薪酬制度）来让它的雇员从长远来考虑它们的投资。安大略省教师养老基金的Leech先生2010年拿到了390万加元。其中长期绩效奖金为51%，年终红利占了36%，基本工资仅占了13%。在华尔街他无疑会赚的更多，但是按照公共养老金标准来看，这已经是巨额薪酬了。。最大的美国公共养老基金CalPERS的老板Anne Stausboll在2011年上半年拿到了38万美元，其中包括96，638美元的红利。
Such disparity may hinder the Canadian model's spread. Joe Dear, the chief investment officer of CalPERS, has said it is “not politically feasible” to set up this sort of compensation structure. For politicians, not to mention voters, multi-million-dollar salaries are not going to be popular.
Many officials at American public pension funds would not want to copy the model anyway. If a big deal were to go south, they might be sued. But Mr Ambachtsheer says board members also have a fiduciary duty to consider how fees are eroding assets. If they have an option to pay 90% less, they should try to take it.
Another obstacle to the adoption of Canadian ways is scale. A fund needs to be a certain size to buy companies and invest in infrastructure projects, and to swallow the upfront costs of building internal teams. Smaller Canadian funds have been unable to follow suit, for example. Sometimes the large funds will syndicate their deals and give the minnows a chance to take part. In 2009 OMERS won approval to manage assets of smaller pension funds in Canada.
The giants face problems of their own. One, paradoxically, is the growth of assets: CPP, for example, expects to manage C275 billion dollar by 2020 and C1 trillion dollar by 2050. Getting bigger makes it harder for each investment to make a difference to overall returns. “How we can scale our direct investing so it continues to be meaningful in a fund that's doubled its size is a challenge,” says David Denison, CPP's boss.
Another challenge is handling expansion into more volatile emerging markets. To find good deals, funds need people on the ground. But as they become global, they may spread themselves too thinly. The Canadian model assumes that diversification is not as important as deep knowledge: the funds are likely to be better at doing deals in Montreal than Moscow. Some funds have opened foreign offices, but Mr Fyfe of PSP Investments is wary: “These people are going to be sitting there telling you to do a deal, so they're not irrelevant.”
Even so, Canadian pensions are primed to do well in these dismal times. Some are planning to do more in credit, since banks are lending less. Cash-strapped governments are also lining up a huge number of infrastructure-asset sales. Politicians find the Canadians cuddlier partners than many others. According to Michael Sabia, the boss of Caisse de depot et placement du Quebec, another pension-fund group: “If they're faced with the consortium of ‘Bonfire of the Vanities' from New York versus a consortium of large public institutions who are long-term investors… I think I know who they're going to pick.”
即便如此，加拿大养老基金在大萧条时期仍有望蒸蒸日上。他们计划在贷款方面拓展业务，因为银行贷款在不断减少。政府也面临现金短缺的问题，因此他们正在计划出售一大批基础设施资产。政客们认为加拿大人是最佳人选。另一家名为Caisse de depot et placement du Quebec养老基金老板Michael Sabia认为，“如果他们面临在虚荣的篝火式的财团与长期投资者组成的公共慈善机构式的财团之间作出抉择的话，我想我应该知道哪种方案能胜出。”