Peter Letko pledges to remain a voice for shareholder rights despite stepping back from daily money management

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Peter Letko might be stepping back, but he is certainly not slowing down.

Late last month, the 75-year-old co-founder of Letko Brosseau & Associates announced he would transition to an advisory role at the start of next year, after spending nearly half his life as senior vice-president of the Montreal-based fund manager he started alongside Daniel Brosseau in 1987. Not much beyond his title is changing, however.

He still plans on cycling the 28 kilometres round trip to and from Letko Brosseau headquarters on McGill College Avenue most weekdays, where he will occupy the same modest, windowless office that has served as his professional home for the past 36 years.

“Daniel has the nice corner office down at the other end of the hall,” Mr. Letko joked in a recent interview. “But I don’t really need that much space.”

He developed a reputation as one of Canada’s most vocal advocates for minority shareholder rights, but anyone concerned that Mr. Letko’s pending quasi-retirement means the country is about to lose one of its most important activist investor voices can rest easy.

“I will continue to be active in the firm, focusing on investment issues and questions of governance, and activism fall in that area,” he said. “I will definitely be watching out for issues and when necessary I will speak out, I don’t know whether I want to use the word ‘fighting,’ but a fighting bent.”

True to form, Mr. Letko released a statement strongly opposing Imax Corp.’s plans to take Imax China private just days before announcing his new role.

In his late September comments on behalf of his firm, which owns a 1.7-per-cent stake in Imax China, Mr. Letko said the roughly US$124-million offer “significantly undervalues the company and unjustifiably benefits Imax Corp. at the expense of minority investors.”

Once he is free of his day-to-day management, Mr. Letko plans to spend more time advocating for Canadian pension funds to expand their domestic holdings. He calls it the Invest in Canada campaign (not to be confused with the federal government agency of the same name that is meant to attract foreign direct investment).

In a very real way, that advocacy is bringing Mr. Letko back to where he started his career.

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When Mr. Letko and Mr. Brosseau both worked at Canadian National Railway’s pension fund in the 1970s, they rallied against legislation that prevented Canadian pension funds from investing more than 10 per cent of their assets outside of Canada.

“It is ironic because Daniel and I were up there lobbying Parliament quite a bit,” Mr. Letko said. “One day they lifted it to 20 [per cent] and we said fantastic and went back and asked for more. Eventually they went to 30 and then they lifted it completely.”

What was then known as the Foreign Property Rule was eliminated in 2005, which is what Mr. Letko passionately believes was a step too far.

“I don’t blame the government of the day, but today there really needs to be a sanity test when you see that you’re taking all your money out,” he said. “If you take big chunks of capital out of the country, you are robbing the country of a great source of capital that is an essential ingredient to economic growth.”

According to the Pension Investment Association of Canada, 23 per cent of pension portfolios were invested in Canadian equities in 1990, but by 2022, that figure had fallen to slightly more than 4 per cent.

On Sept. 21, both Mr. Letko and Mr. Brosseau testified before the House of Commons’ standing committee on finance and submitted a 62-page supporting document to its members, primarily arguing for pension funds to hold reserves against foreign investments in order to make investing within Canada more attractive. That was when Mr. Letko said he felt his career had made a complete circle.

“In the old days we had appeared before the same parliamentary committee,” he said. “Forty years later we were back at it but now we are arguing the opposite.”

“We are not saying that the pension funds are making bad investments. And some people have said that we are doing this to drive up the Canadian stocks that we own, but nothing could be further from the truth,” Mr. Letko said.

He points to pension funds in other countries as examples of how Canadian funds are off base. Japanese pension funds have nearly half of their assets in domestic stocks and even funds based in relatively small countries (even by Canadian standards) such as Norway and Denmark are more than 30-per-cent domestic.

In an open letter that Letko Brosseau is planning to send to pension fund bosses and politicians across Canada in the coming weeks, and which Mr. Letko shared with The Globe and Mail, the firm notes Canadian GDP per capita has fallen from 93 per cent of the United States’ figure in the mid-1980s to 73 per cent today.

“Canada clearly has room for growth and a need for improvement,” reads an excerpt from the letter. “The country must act accordingly.”

Mr. Letko believes the issue is “not something that the pension funds themselves can judge, it requires the government to adjudicate.”

“The government has to look at this and ask whether this regime is really benefiting the country or penalizing the country,” Mr. Letko said. “We think it is penalizing the country because there is a flood of money that is going elsewhere.”

Reinstating a hard cap would be too blunt a measure, he said, but he firmly believes anything Ottawa can do to encourage pension funds to invest more in Canada would, among other things, boost Canada’s all-but-collapsed initial public offering market.

While Letko Brosseau has no plans to appoint a new senior vice-president anytime soon, Mr. Letko said part of the rationale behind his transition is to hand more control to vice-presidents David Després, Isabelle Godin, Rohit Khuller and Stéphane Lebrun. That doesn’t mean Mr. Letko will fully step away anytime soon.

“Maybe at some point there will be an even fuller retirement, but I enjoy this work so much,” he said. “As long as my colleagues will tolerate my voice I am probably going to continue on, biking in as long as I can.”