Government Operations Committee on June 7th, 2016

[Yasmin Ratansi, Liberal, Don Valley East, ON]

If you are part of that index and the shares are decimated, what impact does it have on the pension itself? Does it create that underfunding and is the government then held accountable?

[Daniel Garant]

Actually, you need to look at it on a global basis because, for one Valeant that goes down, you have one Apple or one Yahoo that will increase. You look at the overall valuation of the index. You can take some constituents, some companies, and some shares are going to go down and others are going to go up. When we look at the indexing part of our business, we look at it globally in terms of the global returns that we get from, in this case, U.S. equities.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

When you're doing your due diligence, what sort of risk mitigation strategies do you adopt? I know this is a long answer that you would have to give me, but give it to me in short terms so we can understand.

[Daniel Garant]

The most significant risk mitigation that we use is diversification, which means basically that you put your assets in different categories. The description my colleague gave you is that we have investment in real estate, in infrastructure, in public equities and bonds, and so on. By diversification in asset classes and geographies, countries and sectors, you get an overall better risk management by having not all of your money invested in the same type of investment. That's the key crux of how you do risk management. Also you look at the specific investments, but first you start with the diversification strategy.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay. The one thing that the Auditor General also mentioned was that, when the reports are presented to parliamentarians, they do not generally understand them or aren't able to read them. What are you doing to ensure that parliamentarians have a better understanding? It's their money, not only parliamentarians' but the public sector employees'. How do we read it easily?

[André Bourbonnais]

We've made significant effort in the past year to have an annual report that will be more in layman's terms. Of course, what we're trying to do is to replicate the standard of public companies in terms of our disclosure, but we also understand that our audience is different. In addition to that, we will spend a fair amount of time later on this month and in July to meet each of the planned constituents and explain the results for the year and our activities for the year.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Do you know how much money the plan lost in the Valeant investment? Do you have a rough idea?

[Daniel Garant]

I didn't look at that investment specifically. As I said, it's part of the index portfolio. We look at the overall return and we look at the return by categories. In this case, it would be U.S. equities.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

U.S. equities, you would lump them together. If I wanted transparency and I wanted to see what Valeant did or Rivera did, etc., I wouldn't be able to figure that one out unless I went with the private equities themselves.

[Daniel Garant]

In that case, yes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay. When you invest in private equities are you able to get, as a large body of investors, a seat on the board of any of these equities?

[André Bourbonnais]

Each investment is different, and our governance is tailor-made to the actual participation that we have and the actual interest that we have in each company. If we have a 20% interest, we'll have representation as is commensurate to a minority shareholder, or if we have a 50% interest. But in most of those private investments we have either board representation or board observers.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Blaney, you have seven minutes, please.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Mr. Chair.

Welcome, Mr. Bourbonnais and Mr. Garant.

Your corporation is of great interest. I think not too many Canadians are familiar with it. In fact, today is the first time I have heard about it.

You have 600 employees, $112 billion of assets under management and a portfolio return of 14.5% in 2015. Is that correct?

Can we invest with you?

[Some hon. members]

Oh, oh!

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

The return over 10 years—

[Daniel Garant]

We take care of your pension.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Oh, even the pension of MPs?

[André Bourbonnais]

Yes.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

All is well then.

The return over 10 years is 7.9%. Is that correct? So you have exceeded the actuarial return objective and you don't have an actuarial deficit. You actually have a surplus. How does that work? You still continue to collect contributions and then you capitalize the total?

[André Bourbonnais]

Since we are managing the post-2000 obligations, we are in a privileged position. For the next 12 to 15 years, we will have a surplus of contributions compared to the benefits paid out. Right now, we receive between $3 and $4 billion every year in net contributions. In addition, we have our return. As you mentioned, last year, the return on the assets we manage was 14.5%. That all adds up and, clearly, in the 2030s, we will have to pay out more benefits and, unless we continue to manage and maintain the return, the assets will go down because the benefits paid out will be greater than the contributions.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Could you tell us in how many companies you are investing right now?

[André Bourbonnais]

There are thousands of—

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

We are talking about thousands of companies.

Let me ask you another question and I'll go straight to the crux of the issue. You have invested in Isolux Infrastructure Netherlands B.V., or ROADIS.