When he left behind his first career as a high school math teacher, David Denison wanted to put his love of numbers to work in the business world.
Thirty years later, after stints at some big financial services firms, such as Fidelity Investments Canada, the 58-year-old leads one of the world’s top pension fund administrators, and the Canada Pension Plan Investment Board (CPPIB) is growing fast.
“Part of it was a challenge to myself. Being a successful teacher, could I be successful in a dramatically different environment, in business?” Denison told Reuters in an interview. “And I said, ‘Damn it, I will.’”
CPPIB, which manages pension funds for 17 million Canadians, will double assets under management in a decade to C$275 billion ($264 billion) from C$130 billion at present.
By 2030, it expects assets to grow to C$400 billion, which is about the gross domestic product of Chile and Columbia combined.
Denison, who has been president and CEO of CPPIB since 2005, says the board will target more direct investing as it grows, delving further into emerging markets and growing the private debt department it launched 18 months ago and which currently has C$2.2 billion invested.
“Credit markets are so difficult,” Denison said at CPPIB’s Toronto headquarters, where the work of Canadian artists hangs in hallways and boardrooms. “That is why it is an advantage for us to be deploying capital and private debt right now. We can get very attractive returns, very strong covenant packages, very good protections for ourselves.”
The CPPIB emerged from the global economic crisis almost unscathed, with assets under management now above pre-crisis levels. Its annual rate of return dipped slightly to -0.3% in fiscal 2008, then fell sharply to -18.6% in fiscal 2009, before soaring to 14.9% for fiscal 2010, ended March 31, according to its annual report.
Part of it was a challenge to myself. Being a successful teacher, could I be successful in a dramatically different environment, in business? And I said, ‘Damn it, I will.’”
“We’re not thinking, ‘Oh my Goodness! We have to all of a sudden increase our transaction size or even increase the pace.’”
Denison said of any 100 possible deals, eight or nine will be pursued and two or three might become investments, whether in private equity, real estate or infrastructure.
Asset managers are not pressured to stick to asset allocations or rewarded for taking risks, even if that means some opportunities get away.
“It’s a very explicit statement to our investment teams,” said Denison. “Success isn’t doing a deal. Success is making a better investment for the fund than we already have through the public markets.”
CPPIB was a partner on three of the five largest private equity deals of 2009, and just two of the deals it is working on this year would be worth some $8 billion if completed.
One is a $4.5 billion bid with Canadian private equity firm Onex Corp. for car parts maker Tomkins Plc, while CPPIB is also pursuing a C$3.5 billion deal to buy Australian toll-road operator Intoll Group.
The board likes to partner on private equity deals and does not invest through funds in infrastructure deals.
It’s been a very methodical, thoughtful, evolutionary process of putting us in the position where we can execute a number of transactions and do them as you’ve seen simultaneously.”
In real estate, where CPPIB has closed major deals in Britain and the United States this year, Denison prefers to go in as a direct investor, but with a proven operating partner.
Denison won’t discuss deals the fund is working on, but points at attractive opportunities in real estate in Australia, Britain and continental Europe, especially Germany and France.
Private equity could yield opportunities, and infrastructure is prized in Australia and Britain.
The fund also wants to boost its presence in emerging markets, especially Brazil, China, India, Mexico and Turkey.
Additional reporting by VCJ staffBIO: David DenisonPresident and Chief Executive OfficerCanada Pension Plan Investment BoardAge: 58
Education: Holds undergraduate degrees in mathematics and education from University of Toronto.
Work experience: Spent six years as a high school math teacher, then received his Chartered Accountant designation and began his business career. Has 30 years of experience in the financial services sector, including stints at Merrill Lynch, S.G. Warburg Canada, Midland Walwyn and Mercer Consulting. Joined Fidelity Investments Canada in 1995 as COO and was later named president. Served as president of Fidelity Investments Institutional Brokerage Group in Boston from 2000 to 2003, then returned as president of Fidelity Investments Canada. Appointed president and CEO of CPPIB in January 2005.
Board seats: Chairman of the Canadian Coalition for Good Governance. Director of York University, the Investment Industry Regulatory Organization of Canada, the United Way of Greater Toronto and the Investment Committee for the Toronto Community Foundation.
Did you know? Denison is a native of Gander, Newfoundland, and was raised in Montreal.