Leo de Bever is running late.
A few minutes before I’m scheduled to meet the head of Alberta Investment Management Co., he sends me an e-mail. I’m to order him a cobb salad “or something like that.”
Mr. de Bever’s tardiness is understandable. Given both the state of the markets and the increasingly prominent role of Canadian pension funds on the global stage, he has his work cut out for him.
Frown lines have deepened and grey hairs have sprouted on money managers the world over since the resumption of market turbulence this summer. The same can’t really be said about Mr. de Bever, who looks much younger than his 63 years. But given all of the pressure he’s under, one wonders how long that will last.
As the first chief executive officer of Alberta’s pension manager, which was spun off into a Crown Corporation in 2008, Mr. de Bever must prove that the roughly $70-billion in assets that AIMCo manages for 26 pension, endowment and government funds are better off being steered by his team of professional money managers than they were by the province.
His challenge comes at a time when the spotlight on this country’s major pension plans has never been greater. Funds like the Ontario Teachers’ Pension Plan and the Canada Pension Investment Board are taking on a more prominent and activist role in deals ranging from the U.S. to the U.K. As the newest kid on the block, AIMCo must carve out its niche among the group to ensure it’s top of mind when deals crop up.
After he takes his seat at Signatures Restaurant in an Intercontinental Hotel in midtown Toronto, a relatively understated place in a swanky area, Mr. de Bever is eager to talk about his career trajectory and troublesome state of the global economy. But with an unassuming and soft-spoken manner, it is sometimes difficult to hear him, even though we’re one of only two occupied tables.
Mr. de Bever is worried about the sovereign debt crisis in Europe, and the impact that it could have here. He expresses a significant degree of frustration as he talks about it. “Europe has a bit of not wanting it badly enough,” he says. “I still have relatives there and you can see that the dominating mindset there is to satisfy, not to optimize. I’m 63 now and all my siblings are younger and they all want to retire way before 63 I can tell you, so it’s a different mindset. People want to be comfortable and if getting to a higher level means you have to work harder, the choice they’ve made is not to do that.”
Being responsible for the retirement income for more than 300,000 active and retired public sector employees, Mr. de Bever is acutely aware of the pain another crisis could cause. In an effort to bolster his company against outside threats, and build AIMCo into a money manager that could rival the best, Mr. de Bever has spent the past three years trying to shake off the organization’s bureaucratic tendencies. In between a deep recession and the threat of another one, though, that task has been harder than he hoped.
His first steps were to hire a slew of people, more than doubling the size of the organization, and to set AIMCo up with its own IT servers, general ledgers and accounting systems. Mr. de Bever has also bolstered risk management, and has been making changes to the organization’s portfolios, steering them toward an investment mix that he hopes will produce solid results. But the transformation from a bureaucratic organization to a nimble money manager that can compete with the best in the world takes time, and Mr. de Bever is urging patience – especially as markets confound money managers once again.
“You agonize when the market is doing this and zigging and zagging,” he says. “You try to outsmart it. But that’s another aspect that us investment managers have to get used to. No matter how smart you are, your ability to forecast the future with any kind of reliability is pretty limited. So you have to know that when you make a decision, you have a good chance of being wrong.”
In this new financial world, “bonds are going to be a very dangerous place to be,” says Mr. de Bever, who is gamely going at his seafood cobb salad – the only cobb salad on the menu. He insists he likes it, but I get the feeling he would be too polite to admit it if he didn’t.
The inability to rely on bonds is a big shift for pension funds and insurers, who have traditionally counted on their large fixed-income portfolios for stable returns.
“At some point [Treasury bills]are just going to go back to yielding the rate of inflation,” Mr. de Bever says. “It’s hard to finance pensions off that.”
So if bonds aren’t yielding returns, and stocks are too dangerous, where do pension funds put there money? Mr. de Bever believes the answer lies partly in building things. “Infrastructure’s sort of one rung up from bonds – it’s more risky, but it’s higher return with a bit more volatility – so it’s halfway between stocks and bonds,” he says.
Mr. de Bever developed his appreciation of infrastructure during his time at Teachers, where he bolstered that fund’s stake in alternative assets. For a while in late 2009 and early 2010 he thought infrastructure deals were generally too expensive because investors were pouring into the area. But now he thinks governments should be pushing them as a means to stimulate the economy.
“I don’t mean hockey stadiums and museums, I mean honest-to-goodness stuff that when the economy takes off is going to help us be more productive in North America,” he says. “Of course, it runs up against the fact that it smacks of deficit spending, and I think the answer to that is that frankly organizations like ours in Canada and the United States could play a big role in financing it. That would mean user fees and all of that, but there’s nothing wrong with that in principle if there’s a service being delivered. And there’s a lot to be done: energy, transportation, any number of areas.”
- Born in the Netherlands.
- Father worked for a retail food chain.
- After graduating from high school he won a scholarship to spend a year in southern California as part of an exchange program called American Field Service.
- Received a BA in economics from the University of Oregon in 1970 and then an MA and PhD in economics from the University of Wisconsin at Madison.
- Joined Bank of Canada, 1975, becoming chief forecaster.
- Moved to startup Chase Econometrics Canada in 1980.
- Chief economist and vice-president of investment administration at Crown Life Insurance.
- Vice-president and chief economist, Nomura Canada.
- Ontario Teachers' Pension Plan, senior vice-president of research and economics.
- Executive vice-president at Manulife Financial.
- Chief investment officer of pension fund Victorian Funds Management in Australia.
- In August of 2008, made head of AIMCo.
Married with two grown sons, one of whom works in corporate training in Toronto, the other is finishing a Phd.
“The main thing I do for relaxation is bicycling,” Mr. de Bever says. “In Edmonton, the River Valley is a great place for that.”