I'm surprised there isn't a thread on it but I figured it was worth talking about.
My thoughts on this are that AIMCO's board firing is going to result in shrinking Canadian pension fund mandates which is really bad for Canadian juniors, as arguably one of the best exit ops is going to disappear. At this point, I don't even know where Canadian iBankers like myself are supposed to go?
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Based on the most helpful WSO content, here are some insights on exit opportunities for Canadian junior bankers:
Given the current environment, it might be beneficial to explore these options and stay updated on industry trends.
Sources: Walk me through the Canadian IB sector, Canadian Junior Bankers - Where are you going?, https://www.wallstreetoasis.com/forum/investment-banking/best-ib-groups-in-canada?customgpt=1, RBC Calgary Mass Exodus, Is it just me or is Toronto the absolute worst place for banking
Bloomberg has a good article on the topic. While underperformance and rising costs (due to running more strategies internally) were cited, the entire situation strikes me as very politically motivated. I am not close to the situation, but I am not sure I would extrapolate that this as indicative of a trend. Seems like a perfect storm.
The article was very good. All I can say is I know people in the industry who think this is a trend
Govt got pissed AIMcO was moving away from fossil fuels and starting a virtue signaling ESG group
CPP should be sweating as they're next on the chopping block.
AIMCO board firing probably was more than performance and overhead - pensions have become extremely political there. Isn’t this the same province that wanted to pull out of CPP last year?
I can’t see this impacting other pension funds. Even though funds like CPP have stopped doing direct investments, they still have slots for Co-Invest and fund investing.
If anything we are seeing more pension funds start up in Canada. Mastercard Foundation one is absolutely massive, and the University Pension Plan is growing at a good clip
Wasn't their PE return like 8% or some nonsense?
Yeah it was bad lol. But you don’t fire all those people for underperformance in one asset class, even for total fund underperformance of that.
The derivative strategy blow up a few years ago didn’t help either though
CPP does do direct investing out of its infrastructure and sustainable energies groups, however. To the point on PE – John Graham seems to be of the view that at a certain size it makes more sense to be an allocator vs. a direct investor (at a certain size, you effectively are the market index and outperformance vs. market becomes challenging). The PE group has had a lot of turmoil with some prominent names leaving in the past few years so seems to be the way the fund is going. Also know from friends that still work there that the Analyst program is no longer what it was which is quite the detractor in terms of overall attractiveness.
I agree with the sentiment. Yeah their consumer investing team got ripped apart - curious how voluntarily she went to Fengate
Probably a mixed bag, a political decision to get their people in couched behind a grain of truth. Will be isolated to AIMCO.
How do you think this will affect other pension funds in canadan esp. OMERS?
They have like 19 offices lol
I know public pensions have been on the ESG, DEI train for years and are hyper sensitive to the fees they pay GPs as that data gets scrutinized by the public and is often reported on. I think to counteract this, some brainiacs at CPP 10 years ago though it would be cheaper to hire hundreds of people and start investing directly.
I'm wondering if a study has been done if the mgmt fees and carry paid to GPs (who probably know what they're doing better than some beurocrat at a pension) is less/more than groups like CPP hiring hundreds of people and paying for insane real estate.
My wild guess is that the fee load is actually higher by them doing it in house, and their returns show for it.
Hard to discern cost allocation to just privates but pretty sure CPP cost to run its PE team is less than 2 and 20..
But you need to add “lower performance” costs as well
But you're not getting "2 and 20" style management at CPP. The people on the PE team there are bright with decent backgrounds, but when you think about your average UMM/MF, the people there come from the best banks and are willing to work 16-20 hour days. Big difference imo.
The "cost" is the sum of:
1. Salary, bonus, LTIP/STIP, pensions for the hundreds of excess staff they have. "Excess" is the delta between what they have now and what is required to simply run the business as a fund of funds with some opportunistic co-invest.
2. All the ancillary staff hired to service hiring so many people (massive amounts of HR, tech staff).
3. Real estate costs to house all these extra staff.
4. And most important and meaningful, the massive performance hit by doing things in house where these brainiacs are delivering 8% returns through direct investing when they could and should be getting 18%+ by simply outsourcing.
I guaranty you that even if you just look at #4 in isolation it will be substantially cheaper to just pay 2/20 to outsource the entire program...but let's be realistic, when you're giving 300mm commitments you aren't being 2/20, you're negotiating insane side letter provisions to reduce fees to be first in line for all co-invests, and a ROFR over secondaries.
I believe there will be tremendous blowback from the DEI-focused initiatives across the board at public pensions in particular. At the end of the day, pensioners care about a fully funded pension, not that their money is managed by a minority/women-owned fund.
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