After hiring former CalPERS’ investment chief Ben Meng six months ago, Canadian pension giant CPP Investments has added another seasoned pension executive Kevin Bong to its investment team, in a sign that the C$732 billion ($530 billion) behemoth is staffing up to focus on alpha and enhance the total portfolio approach.
Bong, who previously oversaw AIMCo’s Singapore branch before the Alberta fund shut its local operations, relocated back to Toronto for the managing director and head of portfolio design and construction role at CPP Investments, which began this week. The position sits within the total fund management department and reports to senior managing director and department head Manroop Jhooty.
CPP has been on a journey to evolve its well-known total portfolio approach. Part of Bong’s role will be researching and testing “emerging factors” that can be incorporated into the fund’s total portfolio approach, alongside traditional macro factors like inflation and growth that can influence risk and returns.
Geopolitics and climate change are two “emerging factor” examples, with the fund using scenario-based testing to inform adjustments to the portfolio on a tactical – or even strategic – basis, Jhooty said in an interview with Top1000funds.com last year.
Bong will also take charge of designing short and long-term portfolio targets, systemic risk factor modelling and sustainable investment integration, according to his LinkedIn.
Prior to AIMCo, where he was chief investment strategist responsible for setting the fund’s overall investment strategy in addition to being Singapore’s local head, Bong spent more than a decade in two separate stretches at GIC where his final role was director at the economics and investment strategy department.
Total portfolio management and active management will work in tandem to carry CPP over the C$1 trillion mark in 2031 and C$3 trillion by 2050. In an interview with Canadian press in 2023, chief executive John Graham flagged the beginning of “a decade of alpha” – a period when investors will be rewarded for picking the right countries, asset classes and stocks as the investing environment becomes more volatile.
As CPP looks to capitalise on market inefficiencies, it selected Meng – who is an industry veteran that led some of the world’s biggest and most complex asset owners – to head up the efforts. Before his stint at CalPERS, he was the deputy CIO at China’s massive foreign reserve investor, State Administration of Foreign Exchange (SAFE).
Meng joined CPP as managing director and head of investment portfolio management this March, looking after strategies in the fund’s active portfolio which accounts for over half of its assets under management.
It mainly consists of capital markets and factor investing, active equities, credit, private equity, and real assets departments, and some cross-strategy investments that sit under total fund management. It has delivered a 12 per cent net return over the past five years, including performance of absolute return strategies.
The fund has been finetuning aspects of its thesis on active investment, including cutting back on emerging markets exposures due to improving market efficiency and a narrowing window of opportunities to generate alpha.
On the way to C$1 trillion, CPP said its focus on active management will be on “orchestrating active capabilities in the most effective ways” and breaking down investment silos, as well as building a one fund culture where ” people’s identity in this organisation is CPP” rather than individual investment teams.
CPP Investments’ 10-year annualised net return stands at 8.4 per cent.
