Vantage Point: A Look Back
A look at just a few of the longer-term issues our CIOs have discussed over the past two years, through their own words.
As the primary postal operator in Canada, Canada Post delivers billions of pieces of mail and parcels across the country every year. For the tens of thousands of employees who make it happen, Irshaad Ahmad is charged with delivering something else: a comfortable retirement.
As the Chief Investment Officer of Canada Post’s pension fund, Ahmad leads one of Canada's largest single employer-sponsored pension plans. As for his qualifications, you might say he has the whole “package”; he most recently held the title of Managing Director and Head of Institutional Europe for Allianz Global Investors in London. Prior to that he was Head of AXA UK and Nordics, UK CEO, for AXA Investment Managers; Executive Managing Director, UK, with Russell Investments Canada; and a Principal and National Partner with Mercer Canada.
Ahmad recently spoke with us about his position at Canada Post, his take on the markets, the critical role of diversity & inclusion and a host of other topics.
It was all by accident really. I was good at math as a kid, and I liked it, so I went to university to get a math degree and I also liked computer science and areas like that. Then I bumped into some guys who were talking about something called actuarial sciences and I ended doing that, joining Mercer at just around the time they were starting to do investment consulting. I found myself working for the right person and I put my hand up and said I’d like to try that. So that was that – a bit of blind luck and also the good fortune of working for the right people.
Absolutely. The years I spent at both Mercer and Russell were really my formative years. And one of the most important things I took away from them was the importance of working with the right people. That’s obviously not a technical skill, but the value of working with great people, and nice people, is immense because so many good things can happen when you do. The quality of the people you have working with you and around you is vital. I mean that in all dimensions of quality – not just technical, because character and values really make a difference. Of course, I learned all of the other things that you would think you’d learn at a consulting firm, like stakeholder management, how to communicate difficult topics and things of that nature. And the other fundamental thing is why a pension fund actually exists. It doesn’t exist for us to get good returns in isolation; it exists for no other reason than to pay a pension to pensioners, and that needs to inform all of the work that we do.
I was lucky to land at Canada Post when I did (February 2021). There is a series of values around sustainability at Canada Post as a corporation itself and that makes it much easier to be having those conversations in the context of the pension fund. Our reflection on ESG factors is around risk and return. Like I said earlier, our job is to make sure we can pay a pension and it’s through that lens that we look at everything, which is why these topics are important. Governance, by the way, has always been important; if you haven’t been thinking about governance for the past 50 years you’d be out of business. The externalities around climate have material risk to our pension fund and we need to think about how to deal with that and what to do about it. There are as well social factors where we believe some of them can and will and already have impacted valuations of companies. We’re paying attention to this because we want to be able to deliver the best possible risk-adjusted return for the fund, and we believe these factors will have increasing impact on returns. About five years ago a former colleague of mine said that 10 years from then there would be no such thing as an ESG analyst. And I agree with him. Why? Because the whole topic will get mainstreamed, because it’s that important.
For the past several years, illiquids have played an important role in helping us deliver both risk-adjusted returns and also diversifying risks, whether it be from real estate or private equity or infrastructure. I see that in the fullness of time increasing in importance. And that’s not just because of the ‘search for yield,’ but because we have a fully indexed pension fund, and we need to look for things that can help us deliver returns that have some relationship to inflation. In Canada, we don’t have a well-developed inflation market – we don’t have inflation swaps, for example – and so we don’t have tons of natural hedging vehicles for inflation risk. And Canadian inflation does decouple from US inflation, for a variety of reasons. So to some extent part of our strategy around illiquids is delivering inflation-adjusted returns, not on a year-by-year basis but what you would expect over a reasonable period of time. The other reason we look at this is that there are increasingly interesting ways to both manage returns and risk in financial markets, such as direct lending, and that provides asset owners opportunities to at least think about whether they make sense for their portfolios.
For the past several years, illiquids have played an important role in helping us deliver both risk-adjusted returns and also diversifying risks.
The topic of diversity is very important to the Canadian government, to Canada Post and to Canadian society in general. I was lucky to arrive here to a very diverse team and was able to build from that to make a bit more diverse in the past few months. What’s interesting when you have a diverse team is how you then manage that team, because what you get with diversity is naturally diverse views. That’s a really big part of doing it. But you get cognitive diversity, which leads to different ways that people look at problems and how they want to solve those problems. So you end up with these really interesting debates and disagreements about how to do something. What you don’t want is to start with a diverse team and then end up with a homogenous approach where everyone starts believing that they need to start behaving like everyone else. Then it doesn’t work. The key is to take all those different experiences and make the best out of it.
It varies day by day but right now it’s probably the fear that our view on inflation ends up being wrong. We think it’s generally transient and not as bad as many people make it out to be, and we think central banks may potentially overshoot. And if we’re wrong I’m not worried about the immediate investment consequences because we’re not taking big risks or leveraging ourselves. But if inflation is higher and stickier, that has implications for our liabilities. And as I mentioned, we can’t really hedge those – there aren’t great vehicles to do that. There are lots of risks that we can think about hedging, but the two I worry about most are inflation and, of course, climate.
I play sports and thankfully I manage to do that with my kids, so my master plan to get them to at least do a couple things I like to do has worked out. I play squash with my two sons and golf with my daughter and one my sons as well. And my kids beat me at everything now, but I suppose there is some joy in that as well. Other than that I love going to the cinema and eating. One of the great things about moving back to Toronto is that the food is fantastic.