Pointsofinterest
Controverse à la Caisse By Jordan Milne
Fund loses billions in public money. Retirees worry about rent payments. Managers rake in
millions. Public is outraged.
Rinse. Repeat.
The Conventional Wisdom: As
more of the world has opted against
the idiomatic stick, its counterpart,
the metaphoric carrot, has changed
from its place as a reward for
positive performance to entitlement,
expectation, and a right of passage
for executives. A perpetual cycle
has emerged.
One argument is that bonuses and compensation
structure serve to attract key talent in efforts to
compete with the private sector. Canadian pension
heads already get paid significantly
more than public managers south
of the border, sometimes earning
multiples of their U.S. counterparts.
Regardless, the public generally
is accepting of this remuneration
if the funds do well. If top money
really does attract top talent, a
mature public shouldn’t have a
problem, the bottom line being:
make us money and you can eat
whatever you want. (“The alternative
is to outsource, which will likely be
significantly more expensive,” says
Keith Ambachtsheer, Director of
the University of Toronto’s Rotman
International Centre for Pension Management. “A
special challenge is how to deal with performance-based compensation during periods of falling
markets. A good compromise might be to ‘bank’
earned performance-based compensation during
such periods, and only pay it out when fund
returns turn positive.”)
“the
alternative is
to outsource,
which will
likely be
significantly
more
expensive.”
Michael Sabia, CEO of the massive
$200 billion Caisse de Dépôt et
placement du Québec (Caisse) is
trying to break this cycle: Sabia has
left his veggies neatly untouched on the side of his
plate for 2009 through 2010 following horrendous
2008 results (where the fund lost upward of $40
billion) and less-than-stellar post-crash returns.
Although not the first pension chief to forgo
a bonus, his decision is, if nothing else, a token
gesture of which peers will take note.
Well-known—and furiously debated—is the
common practice of pension CEOs drawing
bonuses based on benchmarks over multiple years.
Asset drawdowns, then, can still create millions
for managers. Pension contributors, on the other
hand, mostly care about their premiums staying
constant and the bottom line of the fund making
it to the penthouse—or at least staying above sea
level. When that happens, they are more willing to
chalk up large bonuses to necessity, or, at the very
least, swallow them as palatable.
Maybe Caisse’s CEO will take a bonus in 2011. If
performance rapidly improves, returns will likely
lead headlines instead of compensation—and the
public may not bat an eye. To get to that point,
however, Caisse (and many others, it must be
said) needs to actually create value. “The Caisse
will now invest only in financial instruments that
it understands and has mastered,” Sabia recently
told the Canadian Broadcasting Corporation. That
seems like a good place to start.
Success Is Not a
Series of Sprints
Helena Morrissey, Chief Executive Officer, Newton Capital
Management and Newton Investment Management
Morrissey: My arrival was more an act of luck rather
than judgment, to be honest. I studied philosophy at
Cambridge University, but knew I wanted a career that
incorporated my love of working with people with my
interest in quantitative matters, so I took a position with
Schroders. Initially, I was based in New York, which was
a great baptism by fire and a huge learning experience. I
was the only woman among 16 men in the fixed-income
area during a really interesting period in the bond markets.
In 1993, after eight years at Schroders, I joined Newton as
one of a team of two women on the fixed-income desk and
became head of a rather large bond group in 1999. In 2001,
Mellon acquired Newton as its first U.K. acquisition. The
CEO and the CIO departed and I was given the opportunity
to become the CEO. I was 35 years old with five children,
and it was a big step into the unknown.
themselves beyond their comfort zone.
How does the culture at Newton foster the advancement
of women?
Morrissey: We have many initiatives for the development
of women. I oversee a women’s group across BNY Mellon’s
different businesses in Europe, the Middle East, and Africa.
It’s not just about creating a stronger business through
diversity, but also about helping disadvantaged women in
the broader community get back into the workplace. We
also focus on work/life balance, including health issues.
What advice do you offer to women seeking to advance
their careers in investment management?
Morrissey: My advice is to be open to opportunity and
think laterally. Some women, and men for that matter,
have the tendency to overanalyze situations and worry
endlessly about what could go wrong. Someone once told
me, “Look before you leap, sure, but do leap, because
there is a safety net that typically emerges.” Sometimes,
we miss the big picture in our lives by getting stuck in
the minutiae.
Do you have a success story that stands out for you over
the course of your career?
Morrissey: Many of my successes have been born out
of trials and tribulations. Shortly after joining Newton, I
recommended a very aggressive instrument in a portfolio
and, for about a quarter, I was dead wrong. However, I
didn’t lose the courage of my convictions. I kept analyzing
whether I had made a big mistake. That position turned out
to be a very good call, albeit a little premature, and we ran
it for a couple of years. It was the right one and the turning
point for me as a bond fund manager. I learned then that
some of the best decisions are not the easiest ones.
What is the best career advice you have received?
Morrissey: The simplest and best advice I’ve received
is from my husband: To be myself. I see many women
struggling to try to fit in, feeling that perhaps they’re in a
minority situation at work. I encourage these women not
to submerge their own personality for the sake of fitting in.
I serve as a mentor to a few colleagues and I feel a great
sense of responsibility to try to encourage them to push
Are there any lessons that you’ve learned at the helm
of a growing family that you apply to business?
Morrissey: You don’t always get family or business
right. Like a large family, everyone in a business needs a
little bit of attention, but I must know where my attention
needs to be focused at any given time to have the biggest
impact. You can’t create something, even a portfolio
to run, if you don’t have any life experience. Running
an asset management business is one of those fields
where you get better with age and experience. There are
always bumps in the road; whether it’s a down market
or an unhappy client, a family is like that too. I find that
stimulating and challenging. I measure success in terms
of sustainability. Success is not about a series of sprints.
If you take on a new challenge and achieve it that day,
then that is a small kind of success. n
