Doug Pearce has seen a quarter-century of change in institutional investment during his 25 years at the helm of one of Canada's largest public-sector money managers.
He's seen the C$102.8 billion (US$97.9 billion) British Columbia Investment Management Corp. ride the “great tailwind” of 30 years of low fixed-income rates, take advantage of the globalization of investments, witness improved governance in the Canadian public pension industry, and realize the growing importance of both market volatility and risk management.
And as he looks to retire as CEO and chief investment officer after 25 years with the agency, which manages assets for pension and other governmental agency funds in the province, Mr. Pearce is looking back on his career at BCIMC — and his 10 previous years with the province's finance ministry — with no regrets.
“It's been a wonderful career,” Mr. Pearce said in an interview. “There's never been a day that I didn't want to go to work.”
Mr. Pearce on Aug. 28 announced his retirement from the Victoria-based independent investment management company he has overseen since 1988, when it was part of the British Columbia Ministry of Finance. Under his tenure, assets have grown to $102.8 billion as of March 31, from $15.9 billion in 1988. (All figures, unless specified, are in Canadian dollars.) For the past 20 years, BCIMC has had an annualized rate of return of 7.9% vs. its custom benchmark of 7.6%.
And recent performance has not lagged. BCIMC had a one-year return of 9.5% for the 12 months ended March 31, according to the agency's annual report, compared with its 7.8% benchmark return. It also topped its benchmark for the 10- and 15-year periods, while matching it for the five years.
Mr. Pearce attributed the performance to BCIMC's focus on solid strategies in long-term investment — the importance of which he said has been lost on those who are pushing for alternatives to traditional defined benefit plans.
“The benefits of long-term capital that defined benefit plans provide is not appreciated in Canada or the U.S.,” he said. “We deploy capital with people who will invest productively. Long-term horizons help us avoid all that speedy trading, which ultimately isn't important. The amount of investment we make in Canadian real estate development, for example, creates a whole host of jobs as well as proving a good return on investment for us. Pension fund investments provide a lot of benefits to the Canadian economy.”
As for the markets in general, Mr. Pearce said that over the years, “we've gone from a domestic mindset to a very globally interconnected capital market with a lot of leverage intertwined in it, which makes it more complex. It's not the just the volatility, but also the risks that are now in the market. Everything is interconnected, which makes (investing) much tougher. Now, with the big decline in interest rates ending, going forward, what will be the new tailwinds and headwinds? There's also the change in demographics, with the world's population expected to reach 12 billion by 2050. What will that mean for food and health care, other investments? What will be the new tailwinds and headwinds?”
However, “with changes, you also have opportunities,” he added. “Going forward, our organization will have to be accustomed to doing business a little bit differently.”
For Mr. Pearce, the changes in markets — particularly in the past five years – “have been pretty draining. My energy is not what I think we need here. Now that the markets are seeing growth, I thought it was a good time for a transition.”
His retirement announcement “caught a lot of people by surprise,” Mr. Pearce said, adding, “but when they think about it, it shouldn't have been a surprise.”
Leo de Bever, CEO at the Edmonton-based Alberta Investment Management Corp., which oversees $70 billion in provincial pension, endowment and foundation assets, praised Mr. Pearce's work at BCIMC. “As a multiclient manager, I probably have a better sense than most of how challenging Doug's job was, and how difficult it is to convince pension board members that extraordinary results cannot come from doing ordinary things,” Mr. de Bever said. “He did it well, and while the model he pursued was different from ours, I have great respect for how he managed his. Finding the best way to fund pensions is tough. I suspect it will not get easier in the years ahead.”
Mr. Pearce is expected to stay on at BCIMC until at least March 31, but will remain longer if a successor is not named by then. He said he will not be involved in the selection for his replacement.
The board of directors at BCIMC will consider internal and external candidates, BCIMC board Chairman Rick Mahler said in an e-mailed response to questions.
“BCIMC's board of directors has a comprehensive succession plan in place,” Mr. Mahler said. “Our first step as a board is appointing the executive search firm, which we will be doing in the very near future.”