The man in charge of the $200 billion fund that underpins the Canada Pension Plan invests with a very long horizon.
Mark Wiseman, president and CEO of the Canada Pension Plan Investment Board, uses the analogy of Wayne Gretzky, saying "we're going to go to where the puck is going to be, not where the puck is today."
That means a highly diversified portfolio, with only one third of its assets in Canada, said Wiseman, who joined the investment board in 2005 and has been its head since July 2012. He previously worked with the Ontario Teachers' Pension Plan.
The board manages the portion of CPP's capital that is not immediately needed for benefits, and Wiseman has a firm grasp of the potential impact of the baby boom retirees. He points out that most of them are still contributing to CPP.
"We expect to have net inflows of capital into the plan for about the next decade," he said in an interview with CBC's The Lang & O'Leary Exchange.
'The policy decisions are tough ones and we leave that up to politicians to make those decisions. What is clear is that Canadians by and large need to save more for their retirement'- CPPIB CEO Mark Wiseman
"So, as a result of that, because we don't have any money to pay out in the near term we can afford a bit of volatility in the way that we invest and therefore take a riskier position and get, hopefully, a larger return in the long run for taking a little bit more risk."
The chief actuary's report in December showed the CPP is sustainable for the next 75 years.
The $200 billion fund is only "middling" in size by global standards, Wiseman said, but its scale means it can take on investments in assets such as real estate and infrastructure that smaller investors cannot.
Diversified by assets, geographically
"So the best way to think about it is we're diversified in terms of risk," he said.
"We have government bonds, we have real estate and infrastructure which are reasonably low-risk, then we move up the scale and we invest in things like private equity and private debt that might be a bit more risky and overall what we're trying to do is get a highly balanced portfolio that's diversified by asset class and by geography."
The CPPIB has stepped up the pace of investment outside Canada, including investments in emerging markets such as Peru, China, Brazil and India.
That's what Wiseman means by having his eye on where the puck will be. He agrees there is turmoil now in emerging markets as money moves toward the U.S. dollar, but points out CPPIB has the kind of investment horizon that can last out market cycles.
Investment in India
"We recently announced our first investment in India, exactly at a time when other people are leaving", he said, "but taking the long-term view by having the luxury of being able to leave our capital in the country for a long period of time, we believe will pay off a substantial dividend in the long-run."
Similarly, he believes China will eventually be the world's largest economy and its growth, though slowing, will be faster than any developed country.
"We still have a third of the portfolio invested in Canada, but if you think about it, Canada represents less than three per cent of global capital markets today so even at 33 per cent we're effectively grossly overweight Canada," Wiseman added.
Wiseman assures Canadians that CPP benefits will be there for them at retirement, though he warns most will need to do some additional saving.
"People can count on the CPP being there in terms of what they had contributed," he said.
He said he doesn't get involved in decisions such as whether CPP should be expanded as Ontario would like or how private pensions should be reformed.
"The policy decisions are tough ones and we leave that up to politicians to make those decisions. What is clear is that Canadians by and large need to save more for their retirement," Wiseman said.
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