Canada Pension Plan Investment Board is restructuring its public markets division, marking major changes to its largest investment group and signalling chief executive Mark Machin's intention to refocus the country's biggest pension fund.
On Monday, CPPIB unveiled a revamp of its public markets group, known internally as PMI, or public market investments, according to people familiar with the changes. The division managed $115.4-billion as of March 31, the fund's fiscal year end, more than the teams responsible for private market investments, investment partnerships and alternative assets such as real estate or infrastructure. The restructuring involves merging different strategies and laying off some staff.
Mr. Machin took over the CPPIB in June, and he inherited a sprawling fund that has seen its total assets under management grow to more than $300-billion, up from about $149-billion only five years ago. One of his early goals has been to make various investment groups more efficient. The public investment group is a division that doesn't get much outside attention because it isn't involved in high profile private equity deals, but is heavily staffed internally.
As part of the new restructuring, affected teams include Global Tactical Asset Allocation, which makes investments based on macroeconomic trends, Global Capital Markets, which helps manage the fund's targeted market, risk and liquidity exposure among other functions, and Short Horizon Alpha, which implements short-term investment ideas based on market dislocations. Many public markets teams have added many employees and new investment strategies over the past few years, but sources say their individual returns haven't always justified the growth. Mr. Machin's changes include layoffs, as well as a shuffle of remaining employees.
Before the restructuring, public markets consisted of five different investment groups, some of which were broken down into still more strategies – an unwieldy mix at a time when the fund is trying to simplify its operations as it grows larger. The CPPIB is also changing the fund's investment risk profile so that it takes on the characteristics of a portfolio with a larger global equity exposure as opposed to government debt, as well as the way it measures the success of its strategies.
A spokesman for CPPIB declined to comment on the specifics of PMI's reorganization.
The new shakeup follows other moves made by Mr. Machin to retool his leadership team. In September, the pension fund put its infrastructure, real estate and agriculture investment groups together to form the Real Asset Investments group, led by real estate veteran Graeme Eadie. This move was spurred in part by the departure of Mark Jenkins, who left the role of global head of private investments to move to New York and work for The Carlyle Group.
In June, Mr. Machin elevated Alain Carrier to the senior management team and into Mr. Machin's former role as the CPPIB's head of international investments.