Reading the report of the Center for Productivity and Prosperity at HEC Montreal and the many comments of the past few days brought me back to my years spent at the head of the Caisse de dépôt et placement du Québec (CDPQ). I acted there as Senior Vice-President, Depositors, Strategy and Chief Operating Officer, from December 2007 to 2016.
The management philosophy that drove us revolved around three main questions:
1. Are we fulfilling our two-pronged mandate: to allow depositors to pay the promised benefits within their financial framework and to contribute to the economic development of Quebec?
2. Do our strategies respect the various mandates given to us by our depositors and do we add value compared to index or passive management?
3. Can we do better?
The study provides a clear answer to the first two questions. This answer is yes. The mandate of the CDPQ is unique. It is the only organization among the eight cited in the study that has a two-pronged mandate.
Do not underestimate the challenge. I am delighted that a study conducted by independent experts, despite its criticisms, concluded not only that the CDPQ is fulfilling its mandate well, but also that the returns it has obtained for its depositors have enabled it to pay billion in benefits each month to Quebecers and improve its financial situation.
The study’s answer to the third question is also: yes, we can do better! This is exactly the philosophy that drove me when I was at the CDPQ.
We looked closely at what our Canadian and global peers were doing well and weren’t shy about borrowing their good ideas. We did so in accordance with our mandate and the risk tolerance of our depositors and in collaboration with them.
However, you have to be careful with some of the comparisons in the study. For example, the demographics of Quebec are different from those of the rest of Canada. Investissement RPC may therefore run more risks than Caisse-RRQ, which explains part of the performance difference. Investissement RPC is to be commended for its performance, but shouldn’t it be questioned on the low percentage of its investments in Canada compared to those of the Caisse-RRQ?
The study also highlights the rigor of the indices and the transparency of the reporting.
We were looking for the right balance between return, risk taking and the impact of our investments. The quest for performance is not the only motivation.
In terms of transparency, we continually wondered how to better explain our strategies and our performance. That being said, speaking in terms of placement, I would say that CPDQ accountability ranks easily in the top quartile!
Quebecers must continue to be demanding of the leaders of the CDPQ. But they can also be proud of this great institution and be assured that its employees are competent and seek to invest the money entrusted to them wisely.
