Mark Machin knew "virtually nothing" about the Canada Pension Plan Investment Board when a headhunter rang him up about a job more than four years ago. Now he's preparing to step into the role of chief executive officer.
The CPPIB has grown significantly in assets and global footprint since Mr. Machin signed on to run the fund's Asian expansion and Hong Kong office in 2012, a role that would grow to include overseeing international investment activities. Hailing from Cheshire, England, Mr. Machin will become the first foreign-born leader of Canada's largest pension fund. CEO Mark Wiseman will leave after nearly four years to take a senior position at asset management juggernaut BlackRock Inc.
These two leadership moves underscore the CPPIB's increasing prominence on the world stage. The fund has evolved from a passive investor in vanilla stocks and bonds to an active global asset manager with foreign offices, expertise in alternative asset classes such as private equity and real estate, and an increased appetite for risk that has helped attract larger and more diverse investment opportunities and partners.
"Just thinking back about what's changed, [it's] interesting that I could be in a leading role in finance in Asia, or at a global financial institution, and have not really heard of CPPIB at all," said Mr. Machin, who worked for 20 years at Goldman Sachs, including leading the investment banking business in Asia, outside of Japan. "That was only back in 2011 or 2012. Our prominence in the world has dramatically increased in the last few years."
Since Mr. Wiseman became CEO, assets under management at the CPPIB have grown by more than $100-billion to nearly $280-billion through the contributions of millions of Canadians as well as through investment returns. About 80 per cent of the CPPIB's investments are outside of Canada now, and Mr. Machin said that will likely increase a bit more over time. The pension fund has also added beachheads in far-flung cities such as Mumbai and Sao Paulo.
Many deals that the CPPIB does today wouldn't have been possible five years ago, Mr. Machin said. That includes the $2.5-billion (U.S.) purchase of a 40-per-cent stake in Glencore PLC's agricultural trading operations in April, which required agriculture experience that the CPPIB has built up in recent years. Other high-profile acquisitions, such as a stake in upscale retailer Neiman Marcus Inc. in 2013, also helped put the fund on people's radar.
That changed how the organization was perceived, and the types of employees the pension fund could persuade to take up its banner, Mr. Wiseman said, pointing to Mr. Machin is the perfect case study.
"When we started, what we did was essentially tap the Canadian diaspora. We tried to find Canadians with global experience and in many cases tried to bring them back to Canada," Mr. Wiseman said. "But as time evolved and the reputation of the fund grew, we've been able to attract the best in the world and not just Canadians."
Still, a Canadian did play a significant role in getting Mr. Machin to take a closer look at the CPPIB in 2011. His former boss Mike Evans, a Toronto-born Olympic rower who was vice-chairman of Goldman Sachs Asia at the time, was friendly with Mr. Wiseman and familiar with the investment culture the CPPIB was trying to create. He put in a good word. Mr. Machin was also swayed by the recruiter's suggestion that working for the pension fund would be a way to help millions of people. That struck a chord with Mr. Machin, who began his career as a medical doctor in London, and said he would only entertain the idea of leaving Goldman Sachs for something "more worthwhile in the world."
Mr. Wiseman has also benefited from the CPPIB's increased international prominence. In September, he will join BlackRock to oversee global active equity and a team that manages more than $275-billion (U.S.). In recent months, Mr. Wiseman and Larry Fink, who co-founded and runs BlackRock, worked together on group called Focusing Capital on the Long-Term, which tries to stretch the thinking of major investors away from daily and quarterly performance.
Mr. Machin said the CPPIB will stay the course with the strategy the executive team has developed, and said his greatest challenge now is just to keep looking for good long-term investment opportunities. But employees may sense a difference in leadership style at the top. Mr. Wiseman describes Mr. Machin as intellectual and eclectic with a "quiet confidence about him that makes him an extremely well-liked person within the organization."
The CPPIB's chair Heather Munroe-Blum said the board was drawn to Mr. Machin's understanding of the fund's rapid growth, expansion of offices and strategy. She described his demeanour as very Canadian, and his management style as collaborative and open-minded. Ms. Munroe-Blum said the board is always looking to have multiple candidates in the management team that could step into the CEO role.
Donald Raymond, who worked at the CPPIB for 13 years until 2014 and as chief investment strategist for his final four years, agreed that Mr. Machin was a good choice. "There is no doubt that overseas investing is crucial for a plan like CPP with a lot of exposure to the Canadian economy [through CPP contributions] and Mark's deep experience in this area, no doubt, played a role."
On Thursday, the CPPIB released it fiscal 2016 results and an analysis of the pension fund's active management strategy, which has now been in place and evolving for one decade. The fund's 10-year real rate of return on its portfolio was 5.1 per cent.
With files by reporter Tim Kiladze.