It is still too early for Michael Sabia to have the last laugh. But that he has made it this far – with his mandate as Caisse de dépôt et placement du Québec chief just renewed until 2021 – should certainly warrant a contented grin from the man the skeptics had deemed unfit to serve.
The former BCE Inc. head is on track to become the longest-serving Caisse CEO in the politically sensitive Quebec pension-fund manager's 52-year history. Since his counterintuitive 2009 appointment, he has silenced the critics and brought normalcy to the once chronically crisis-prone institution.
How's that for a return on investment?
The Caisse that will unveil its 2016 results on Friday is an institution that has been transformed in Mr. Sabia's own image – simple and sensible, if just a tad boring. Once a running soap opera, the Caisse now follows a script that reads like the telephone book. But after the disastrous run of the pugnacious Henri-Paul Rousseau, Quebeckers will take No Drama Sabia any day.
Under Mr. Sabia, the $250-billion Caisse has produced respectable, if unspectacular, results. It has negotiated the shoals of Quebec politics with aplomb, managing to avoid becoming the centre of attention whenever politicians start fretting over the sale of the latest icon of Quebec Inc. It helps that Mr. Sabia has gone out of his way to showcase the Caisse's investments in la relève – a new generation of Quebec entrepreneurs in the digital economy.
It also helps that, unlike Mr. Rousseau, Mr. Sabia insists he sees no conflict between the Caisse's twin mandates – to generate the best returns possible for the Quebec Pension Plan and its other public-sector depositors, all while contributing to Quebec's economic development.
Exhibit A for Mr. Sabia is the Réseau Électrique Métropolitain (REM), the $6-billion Montreal light-rail transit system the Caisse wants to build, own and operate. Indeed, the Caisse's board (with provincial government approval) renewed Mr. Sabia's mandate two years ahead of its scheduled end in 2019 precisely to give him the time to get the REM up and running by 2020.
The REM, Mr. Sabia said in a Wednesday speech to the Montreal Board of Trade, embodies the complementarity of the Caisse's dual mandates "more than any other investment project."
It could also prove to be his undoing if the REM turns out to be a boondoggle, which is not being overly pessimistic given the checkered history of big infrastructure projects in Quebec. Mr. Sabia has yet to show he can make the numbers work. One can imagine a perfect storm engulfing the Caisse if global markets go south and the REM goes off the rails.
Still, the Caisse is better positioned now to weather a major downturn than it was in 2008. The crash of that year not only exposed just how leveraged Mr. Rousseau's algorithmic bets turned out to be, it revealed deep inadequacies in the Caisse's risk-management practices. Mr. Rousseau chased returns, pitting Caisse portfolio managers against each other in the belief that healthy competition would keep everyone on their toes.
Instead, it led to the asset-backed commercial paper debacle and the worst crisis in the Caisse's history.
Mr. Sabia has described his investment philosophy as "plain old common sense," preferring to invest in easily explainable assets and "not in abstract financial products that only a math PhD can understand." That means loading up on shares in Colgate-Palmolive Co. – the Caisse owned $561-million worth of them at the end of 2015 – and aiming for long-term, steady returns.
A lot of the credit for this strategy goes to chief investment officer Roland Lescure, whom Mr. Sabia recruited from French asset management firm Groupama in 2009. Like his boss, Mr. Lescure is a no-nonsense and disciplined manager who keeps his head in the books.
At 63, Mr. Sabia had been expected to leave the Caisse in 2019. He still might, if markets tank and problems surface before then. But if he stays until 2021, he will have outlasted every previous Caisse chief, including Jean Campeau, who led the institution's push to develop a francophone business class in the 1980s. Mr. Sabia's reign has not been as eventful, but he has proved to be the right man at the right time for an institution in dire need of a house cleaning.
Few expected the Ontario-born anglophone to inhabit the guise of Quebec's most powerful financial executive as naturally as he has, especially after the cold shoulder he received in 2009 from some business leaders and hostility expressed by a few Parti Québécois politicians.
That's got to be worth a laugh on his part, if not quite the last one.