Pension board a growing concern little-known Crown corporation with a big wallet
OTTAWA–The Public Service Pension Investment Board, which jumped into the business pages last week with a multibillion-dollar purchase of the country's largest satellite owner, is a little-known Crown corporation with a big wallet and an eye for diversified investments.The board, in business since 2000, invests on behalf of federal public servants, the military and the Mounties. With $28 billion in assets, it's dwarfed by the Canada Pension Plan, Quebec's Caisse de dépôt et placement du Québec and the Ontario Teachers' Pension Plan, all in the $100 billion-plus range, but it's a growing concern.And it has a leg up in that it isn't actually writing pension cheques. Current contributions more than cover existing pensions, and the excess goes to the board to invest. It estimates it may be a decade before it has to look at contributing to the pension burden. Until then, it's building a nest egg. The $3.42 billion purchase of Telesat Canada from BCE Inc., announced on Dec. 18 in partnership with U.S.-based Loral Space and Communications Inc., will give the board a 36 per cent economic interest in Telesat and majority voting control. In October, the Public Service Pension board bid $2.8 billion for Retirement Residences Real Estate Investment Trust, Canada's largest operator of seniors' homes. These investments are part of a strategy the investment board's directors decided on three years ago, when Gordon Fyfe became president and chief executive officer after 20 years as a private-sector financial adviser and investment dealer. At the time, the vast majority of the board's money was in bonds and stocks. Fyfe led the move into real estate, private equities and infrastructure. ""The board asked the management to do a lot of diversification because we are a young fund,"" said Anne Marie Larondeau, a spokeswoman for the pension corporation. Under Fyfe, the fund's holdings now include office towers and hotels in locations as far-flung as Tokyo and New York. It's paying off, too. Last year's return was 19.1 per cent. Fyfe said the change offers higher returns, especially since the board has the luxury of a long-time horizon in its investments. ""The attraction of real estate to a pension fund like ours is that it's an inflation-sensitive investment,"" he wrote in the latest annual report. ""Like real estate, infrastructure investments are inflation-sensitive – revenues tend to increase with inflation – are generally long-term in nature and require large outlays of capital.""