“How many times in one’s life or career do you get the chance to come into an organization like CPPIB, early stage, and really have the opportunity to help shape how it’s going to evolve?” he asks.
The hardest part, he says, was convincing people – especially potential hires – it was possible. “We had to battle the perception that this was a passive investment organization, because that’s how it had largely been operating.
“We didn’t have a track record. There was a perception that we were a government agency and we were influenced by the government. … The early people who came on board really were taking a lot more personal risk and career risk than somebody who decides to join now.”
He says his most important decisions in the early years were around hiring key staff at a time when the CPPIB was doubling its workforce annually.
“No matter what size of company you’re talking about, it’s not easy to double and do that well,” he says.
It has become almost a cliché for managers to say they struggle to hire people who fit their culture. But in the case of CPPIB, the challenge was real. Under Mr. Denison’s watch, the organization hired numerous senior investment experts with no background working for a public sector pension fund.
Many top deal makers have big personalities, a singular focus on a profit goal, and are accustomed to almost limitless compensation opportunities. That works well at a high-flying hedge fund, but can be an awkward fit at a conservative and very public pension plan.
“I personally interviewed a lot of people who I would say are terrific professionals in their area of activity – private equity or public market investing or real estate investing, whatever the case might be – but when we saw how they wanted to operate, I could quickly say, ‘You’re ideally suited to a different environment than the one we have here,’” Mr. Denison recalls.
It didn’t always go smoothly, and Mr. Denison acknowledges there were hiring mistakes.
“Sometimes we did hire someone where the fit wasn’t right on both sides. What we tried to do was say, ‘Let’s identify that as quickly as possible and we’ll find ways to part company in as dignified a way as possible.’”
The worst period in the job, he says, was watching the fund’s assets erode in late 2008 and early 2009 as financial markets melted down. In the last quarter of 2008 and the first quarter of 2009, the fund’s total assets fell by $11.6-billion, losses the CPPIB recouped by the end of September, 2009.
Mr. Denison says it was highly stressful because the money is so crucial to the CPP’s 18 million members.
“It was an incredibly difficult time for all of us at CPP Investment Board, seeing the value of the portfolio erode essentially day by day as we went through the fall of 2008 and the first quarter of 2009,” he says. “We were in the headlights at that time. It wasn’t easy. We were criticized by a number of people, including on the floor of the House of Parliament.”
In life after the CPPIB, Mr. Denison has swapped “having one thing dominate my time” with a new approach to work with four elements: corporate boards, non-profit and charitable boards, public sector or policy initiatives like task forces, and playing a role with a university.
Evidently, once a portfolio manager, always a portfolio manager.
“Having been in the investment industry for a while, thinking about it as a portfolio comes naturally and thinking about diversification comes naturally as well,” Mr. Denison says.
THE TROUBLE WITH PRPPs David Denison says the federal government’s proposed new pension program for Canadians will have a limited impact without design changes.
The former CEO of the $170-billion Canada Pension Plan Investment Board said the proposed pooled retirement pension plan (PRPP) needs to be set up as a mandatory scheme except for those who actively opt out, saying he worries too few will participate at a level needed to make a meaningful change to retirement incomes.