Mark Wiseman became CEO of the Canada Pension Plan Investment Board in 2012, leading a team that now manages $273-billion in assets, and generated investment income of more than $4-billion in the second quarter of fiscal 2016.
Do people ask you if they're going to have a pension when they retire?
All the time. The reality is that the CPP is an extremely reliable portion of most Canadians' savings—and I go to great lengths to explain that.
What is your investing style?
Our approach is very much taking a long-term view. In many respects, the reserve fund of the CPP has some of the characteristics of a portfolio that's optimal for somebody in their late 20s or early 30s. And as most financial planners will tell you, that is a portfolio dominated by equities, with a higher degree of risk than one would have in their 60s.
Alternative assets make up about 50% of your portfolio. What's the attraction?
We have comparative advantages individuals don't have, and that's one of the great benefits of having a large pool of assets. First, we have scale. Second, we have certainty of assets—you can't redeem your money under the CPP. And third, we have a long time horizon.
Can an individual investor mimic your style?
You can try, but you couldn't do it at the same cost. And it wouldn't be the right decision for most investors because they're not diversifying the risk across many people.
If you had to name one investment that typifies CPPIB, what would it be?
Wilton Re, a life reinsurance company, which plays to all of our comparative advantages. But more to the point, life insurance is a perfect hedge for one of the major demographic risks facing the CPP—that we've underestimated longevity. What is the risk of holding life insurance policies? It's that you've underestimated mortality.
Any big regrets?
There are two types of errors you can make. The first is easy to spot: errors of commission. You have to make mistakes. You have to lose money. If you're not doing that, you're not taking enough risks. But you don't want to make the same mistake twice. The other errors are harder to analyze: errors of omission. What is the investment you passed up on?
Do you have an example?
During the financial crisis, there were several investments we did not have the intestinal fortitude to make. We were plagued by the same psychological fear that plagues all investors. One of the ways you can fight against human nature—which is to be overenthusiastic when markets are bullish and overly pessimistic when markets are bearish—is to ensure you have certain systematic aspects in how you manage the portfolio. In other words, rebalance to the debt and equity levels you believe are appropriate for the fund. It's a mechanism as markets are falling to be buying equities, and the exact opposite happens as markets come back up. You never have to figure out where the bottom or the top is.
Do you have to be an optimist to be a long-term investor?
I'm not sure, but it would be a pretty miserable existence if you weren't. That may be one of my flaws: I would describe myself as a glass-half-full type of person.
What keeps you awake at night?
I don't sleep much, but I sleep really, really well. There's not much that keeps me up at night, except maybe jet lag.