By the time Jim Leech retired from the Ontario Teachers' Pension Plan at the end of 2013, after six years, it had become a global leader in private equity investing, with assets of more than $140 billion.
Should small investors be envious of an institutional investor's ability to tap private equity?
Size is an advantage. Since private equity investments aren't public, you're not dealing with thousands of owners. There's usually one or two or three large owners. The other advantage is the time horizon. Teachers doesn't have a liquidity requirement tomorrow morning. It can devote a certain amount of its portfolio to non-liquid assets, or assets that may take a few years to cash out of.
Are there advantages that small investors have over the big guys?
One problem that institutions have is that they build up an expertise and overhead in a particular asset class. That asset class may go out of favour or go through years of bad returns. So what do you do with all those people? Sometimes it's hard to shut it down, when you should be shutting it down. A retail investor can just sell the stocks.
Where do you see the biggest risks in today's market?
There are two big risks. One is geopolitical: We have a major country with nuclear weapons, backed into a corner and led by a guy who is unpredictable but very popular. That's not a great recipe. The other big issue is the imbalance in wealth. Inequities have led to a massive number of people being unemployed.
Do you have an investing motto?
When Claude Lamoureux retired and I became CEO, he left a sign for me on my desk: "Remember, a fool and his money is invited everywhere." When you're running an institution the size of Teachers, it's a very good thing to keep in mind. You're being invited not because people think you're smart, but because you have $140 billion.
Should investors be looking abroad more than they generally do?
We do need to think more internationally. The Americans can get it by buying the big multinational companies, like Kraft. We don't have as many of those in Canada, so it's harder to get international exposure by buying just Canadian stocks.
Is there a particular metric you lean on?
It's funny, the whole time I was at Teachers, if you asked me on any given day what the stock market had done, I wouldn't have been able to tell you. But in terms of meaty economic analysis, I put some weight in the World Economic Forum in Davos. That's probably where I got the information.
Who's the best real-life Wall Street character?
I've always found Ace Greenberg, the former chairman of Bear Stearns, to be one of the more entertaining guys. I particularly remember his book of memos to staff, which was fascinating. He didn't have an office—he sat on the trading floor.