trf1066ca wrote:
2000: 5 employees, average senior management annual compensation $220,000
2014: 1,000+ employees, avg sr mgmt ann comp $3,300,000
2000 was CPPIB's first year of operation. Total AUM was $44.5 billion of which 95% was the non-marketable provincial bonds in which the reserve was previously invested.
2014 annual report says senior mgmt salaries ranged from $340,000-$505,000. The rest is hefty bonus for meeting/exceeding personal objectives and, to a greater, extent performance bonus for beating the indexed benchmark. Performance bonus is based on "dollar value added" over past 4 years. DVA is the extent to which fund return minus all costs beat the indexed reference portfolio which is cost-free.
zinfit wrote:
I am in total agreement on this topic. If there ever was a case for low cost passive investing this is it. Clean house and out source to Vanguard.
In its annual report, CPPIB says it went active to capitalize on these advantages:
Long horizon – by its multi-generational nature, the CPP has an exceptionally long investment horizon. CPPIB can, and indeed
must, assess its opportunities, returns and risks over decades, not years or months. Many other market participants must take short-term actions forced on them by business imperatives or legislated requirements. CPPIB can benefit from short-term market dynamics, but is not driven by them.
> Certainty of assets – there is a high degree of certainty and stability to the Fund’s asset base. We are not subject to external directions, nor to any requirement to liquidate investments to pay benefits, as CPP contributions are projected to exceed benefit payments until 2023. Nevertheless, we always keep sufficient liquidity to make major new investments when we identify good opportunities and to adjust the total portfolio mix at any time as needed.
> Scale – as one of the 10 largest retirement funds in the world, we are able to make sizeable investments in private markets and access proprietary public market strategies around the globe. Likewise, we can undertake large transactions for which few others can compete. Scale also makes it feasible to build highly skilled in-house investment teams, superior investment technology and robust operational capabilities. Internalizing these activities wherever appropriate makes for the most cost-effective global
investing platform.
If it were only indexed, the CPP Fund could not directly own long-life assets such as office buildings, warehouses, electric systems, ports, toll roads and airports. Note: all of these assets have income streams that are closely or directly aligned with inflation. The benefits CPP pays are, of course, inflation-indexed.
No, that's not average compensation. The $313 million comes from note 8 and reflects total "personnel costs." I think that's the total HR budget and includes the cost of establishing offices in New York and Sao Paolo while expending other foreign offices. FWIW, CIBC's annual report shows average comp -- salary + bonus + benefits -- for its 43,000 workforce at $98,906 and, of course, a large portion of its workforce consists of low-paid tellers while most of CPPIB's employees are high-dollar investment and computer personnel.
kcowan wrote:I guess all the dire forecasts for CPP are coming true faster than we imagined. Better collect what we can before our children are asked to make up for this mismanagement!
Even with seemingly high and mounting costs, CPPIB's active program has thus far actually made CPP more sustainable. The Chief Actuary's projections indicate that to maintain current benefits and contribution rate, CPPIB has to average a real return after all expenses of 4%. Thus far they've averaged 9.7% over the 5 years ending April 1, 2014 and 5.1% over 10 years. After all costs, they've generated $3 billion more than the indexed benchmark since going active on April 1, 2006. They also say the portfolio -- which is 50.7% passive and 49.3% active -- was 30% less volatile than the benchmark indexed portfolio during that time. Note: they don't attribute any costs to the benchmark indexed portfolio.
Insomniac wrote:
BCIMC has 199 employees.
Their annual report says 41% of their asset base is run by external managers. As far as I can see, their AR does not report the amount of external mgmt fees paid.* CPPIB does most of its investing in-house following the model created by Ontario Teachers'. In-house is much cheaper than external. IIRC, CPPIB says the cost of running its infrastructure portfolio is just 10% of what it would cost to out-source.
* I believe the Fraser report criticized CPPIB for reporting transaction costs and external mgmt fees separately from its operating costs. T-costs and external fees are included in each investment's ACB and thus reflected in the calculation of its return. AFAIK, all institutional investors follow that practice and its why mutual funds report a separate "trading expense ratio."