In a major changing of the guard in the Canadian pension management world, Michael Sabia has announced he will leave the Caisse de dépôt et placement du Québec next February, a year ahead of schedule.
Sabia, 66, has been at the helm of Canada’s second-largest pension for 11 years, following a career that included serving as a senior executive in the telecommunications and transportation industries.
As the first Anglophone to run the Caisse — which has a rare dual mandate to achieve optimal long-term investment returns and to contribute to Quebec’s economic development — his hiring in the aftermath of the 2008 financial crisis was controversial.
At the time, the Caisse was dealing with one of its costliest missteps: heavy investment in asset-backed commercial paper, a form of short-term debt that had exposure to the U.S. subprime credit market, that contributed to a loss of a quarter of its assets in 2008 alone.
But under Sabia’s tenure, assets nearly tripled, reaching $326.7 billion, and the pension has posted solid five and 10-year annualized returns of 8.3 and 9.9 per cent.
“He has been able to deliver good returns and to please the various funds and their members,” Claude Lamoureux, former head of the Ontario Teachers’ Pension Plan Board, told the Financial Post. “Also, what is more important, he (kept) his political masters happy.”
When Sabia took over as CEO of the Caisse in 2009, 64 per cent of its assets were invested in Canada. But by the end of 2018, the balance had shifted, and the same proportion was invested globally.
At the same time, under Sabia’s guidance, the pension manager has maintained its status as a champion of Quebec industry, including retaining its longstanding investments in troubled engineering firms SNC Lavalin and Bombardier Inc.
Lamoureux said Sabia’s “signature” style — solid investments that will pay dividends for both the pension and the province — can be seen in the Caisse’s recent investment in a $6.3 billion light-rail system planned for Montreal, scheduled to open by the end of 2021.
His leadership has been founded on a clear vision
Expanding the portfolio of global investments has been a trend for many Canadian pension funds, but Sabia deserves “a massive amount of credit” for the Caisse’s transformation and performance, said Mark Wiseman, former CEO of the Canada Pension Plan Investment Board.
“Michael has done an incredible job leading la Caisse,” Wiseman told the Post, praising Sabia’s “unrelenting” work ethic and attention to detail.
“Under his tenure, CDPQ has become one of the most sophisticated, risk-aware and well-managed institutional investors in the world,” Wiseman said.
In 2017, Sabia’s term as CEO of the Caisse was renewed through March of 2021. However, he will leave just over a year early to take a job leading the Munk School of Global Affairs and Public Policy at the University of Toronto, a post he was offered following a global search process.
“This appointment will allow me to continue working on issues that I think are particularly important in the current state of world affairs,” Sabia said in a statement, noting that he will spend time in both Montreal and Toronto after he starts the new job in February.
“I know that I am leaving CDPQ and its people in a strong position to seize the many opportunities that lie ahead for them as I move on to my next challenge,” he said.
The Caisse has retained an international recruitment firm and plans to name a successor by the beginning of next year.
Robert Tessier, chair of the Quebec pension’s board, said Sabia did an “outstanding” job.
“His leadership has been founded on a clear vision in a complex and changing world,” Tessier said, adding that the Caisse has been built into a global financial institution with a diversified portfolio that benefits both depositors and the Québec economy.
“Courageously stepping up to the challenge of leading CDPQ in 2009 following the financial crisis, Michael and his team step by step have rebuilt the organization and repositioned it with new ideas.”
Sabia’s smooth run was far from a foregone conclusion when he took the job in 2009, following the departure of Richard Guay only four months into his appointment.
Sabia’s background, which included time as a federal government bureaucrat who worked on the tax overhaul that would lead to the creation of GST, made him a natural target for the Parti Québécois, said Karl Moore, a professor at McGill University’s Desautels Faculty of Management.
“It was just something where as the PQ, you go, here’s a guy who’s not from Quebec, whose mother-tongue is not French and in fact worked for the federal government…. They’re not natural allies,” Moore said of Sabia, who also worked as Canadian National Railway’s chief financial officer and chief executive of BCE Inc.
I don’t think they blindly invested in Quebec
While tilting the portfolio toward a global focus, Sabia stayed true to the Caisse’s other central mandate of investing in Quebec, Moore said, pointing to large investments in Quebec’s tech sector, notably in Element AI and Lightspeed POS Inc.
“Part of it is it’s Quebec-based,” Moore said, “but it’s also a good investment. I don’t think they blindly invested in Quebec. They did it with a lot of wisdom and insight.”
Sabia navigated these challenges while proving to the government that he was worth keeping in the role, Moore said, suggesting that one slip anywhere along the way would have been all the PQ needed to dismiss him.
Sabia’s exit marks the third recently announced departure of a long-time Canadian pension CEO.
Ron Mock, chief executive of the Ontario Teachers Pension Plan, will retire and hand the reins to Teachers’ Jo Taylor on Jan. 1.
Jim Keohane, CEO of the Healthcare of Ontario Pension Plan, announced this year that he would be retiring in March of 2020.