Michael Norbrega, president and CEO of the Ontario Municipal Employees Retirement System, is calling for the consolidation of Canadian pension funds.
In his keynote address to the Conference Board of Canada’s 2009 Summit on the future of Pension Funds in Toronto on Monday, Nobrega proposed the consolidation of pension funds to create a superfund of $150 billion to $200 billion.
The challenge of a superfund would be finding an asset mix that satisfies most parties. However, because of its substantially larger investment pool, the fund would be in a position to make substantially larger infrastructure investments which would fit its long-term and risk-averse mandate.
Nobrega argued OMERS was in position to lead such a consolidated fund based on its prescient investments in green technologies and green energy, the bricks and mortar of health care and dedication to education. He also cited important partnerships — shared expertise — with Oxford Property Group, which manages OMERS’s real estate assets and Borealis Capital Corp., a merchant bank, partially owned by OMERS, which directs their infrastructure investments.
Ranked third in Canada, OMERS is a Canadian giant, but ranked 46th world wide for assets, the fund is a small player internationally. OMERS has 390,000 active and retired members from 921 employers and manages a portfolio of $43 billion.
Only two Canadian pensions funds rank in the top 20 funds internationally. The Caisse de dépôt et placement du Québec manages $120.1 billion of net assets, while the Ontario Teachers Pension Plan manages $87 billion.
Nobrega led off his talk with a history lesson. He pointed to a shift in housing policy under the Clinton administration, whereby Fanny Mae and Freddie Mac were mandated to make riskier home loans. No one, however, was forced to buy the credit derivatives and it was a failure or risk management that the paper spread as wide and proved as widely toxic as it has.
When it comes to risk management, Nobrega trusts skepticism over quantitative models “Fear and judgement drive the market. Quantitative models do not measure such emotional human judgement and neither can regulation,” he said.
The consolidation of the pension fund environment is relatively radical step — but not entirely out of line with the findings of expert panels from Ontario, Alberta and British Columbia and Nova Scotia, which have been published in the last year. While Norbrega’s plan speaks to the long-term sustainability of the Canadian pension funds, in the immediate term making it a reality will be a serious challenge. Nobrega called for “bold and courageous political leadership. It is the right time to bring about change, we need top share professional ideas.”
IE
OMERS chief calls for pension fund consolidation
Superfund would be able to make substantially larger infrastructure investments
- By: Kate Betts-Wilmott
- April 21, 2009 April 21, 2009
- 07:30