CPP Investments talks tech: Deployment not innovation; bullish on AI

Canada’s CPP Investments currently manages C$675 billion in assets but is projected to reach $3.6 trillion assets under management by 2050. The operational challenges, particularly the evolution, thinking and implementation of technology supporting the investment process, are a key focus for Jon Webster, the investor’s chief operating officer who explained to delegates at the Fiduciary Investors Symposium at the University of Oxford how the fund sees technology as value enhancing rather than as a cost.

The pension fund for some 21 million Canadians uses technology “to make it a better investor” and deliberately puts technology into the hands of the team to ensure it is put to use and deployed.

Technology is framed as transformational, and within this context used as a substitute for labour and for synergising resources in the organisation. It is also used to expand the opportunity set and augment the ability to invest. Webster said that technology is used with a simple premise in a way that gives the team creative control on a safe and secure platform.

In the last 18 months the pension fund has moved away from rolling out big tech programs and projects, focusing instead on an operating role. This requires analysis of whether people want to use the technology, and if its investments in tech are having an impact. The hope is that this will stop the explosion of technology across the organisation, leading to choices around standardisation and complexity.

“We have to be paid for the complexity we put in,” Webster said.

Because the focus is on deploying technology, there is no pressure to innovate. “We have partners that do that,” he said. He added that the pension fund’s focus reamains on getting the technology into the hands of people who can deploy it and use it in a “super targeted” and “surgical” process.

Technology will only contribute to basis point performance if it goes into the hands of people drawing on those products. He also advised on the importance of tech investment at a base level which will then have a compounding effect over time. He advised on the importance of clear metrics to show the return on tech investment.

Perpetual modernisation is now a fundamental principle at CPP Investments. Integrating AI and machine learning stands at the fore of the latest wave of modernisation and illustrates how tech architecture evolves in a model that is upgraded, evergreen and anchored. Webster also reflected on the importance of knowing “when to buy and when to build” as well as ensuring the team always has the ability to alter course around choices.

He said CPP Investments management team is  clear about where technology provides an advantage, and described the investment team as “deliberate” about where technology adds value – like in research and active equities. (See How technology plays a central role in CPP’s evolving strategy)

Bullish on AI

Webster said CPP Investments is bullish on AI but noted that many investors are reticent and not embracing it.

AI represents a reconfiguration of the tech industrial complex and symbolises a totally new way of thinking. He predicted that all disciplines “that requires a large amount of thinking”  will be impacted by machines.

“40-80 per cent of what you do will be surpassed by machines,” he said.

The pension fund’s operations team already speak the same language as investors. For those that don’t, he said Chat GPT now speaks the language of investment, representing a fundamental change in how knowledge is acquired and distributed within organisations. The technology represents a competitive advantage because many organisations rely on the fact “they think they are above average.”

If “thinking is a material part of what you do” the playing field will level.

Webster urged investors to examine their edge. He said CPP Investments already has straight through processing and technology that reads the documents coming into the private markets operation, putting the information into ledgers, for example.

He acknowledged that it is difficult for teams to buy into the transformative power of technology but concluded that the barriers are now much lower to the incremental use of technology.