At the beginning of September, Provident10, which oversees the administration and asset management for Newfoundland and Labrador’s Public Service Pension Plan, welcomed a new chief investment officer, Michel Malo.
With $6.6 billion in invested assets as of year-end 2018, Provident10 is a fairly new entity. In December 2014, the province’s government and its five largest unions signed a joint sponsorship agreement to create an independent pension organization. And it was only in 2017 that administration for the plan was transferred to Provident10.
The fact that it’s still early days is one of the reasons Malo was excited to join Provident10, he says, noting most of the plan’s investments are currently outsourced to external managers, but the goal is to bring much more of the investment oversight responsibility in-house.
Malo joins the organization after serving as vice-president for investments in Canadian National Railway Co.’s investment division. Previously, he worked for the Qatar Foundation Endowment and has a wealth of prior experience from other Canadian pension plan asset managers including the University of Toronto Asset Management Corp. and the Caisse de dépôt et placement du Québec.
The future is exciting at Provident10 as the organization evolves its approach to investing. “In the past, it was much more of a 60/40-type portfolio and what they ended up doing, and this is before me, [was] an asset-liability study to try to improve and maintain the funding ratio — the overall good performance of the fund,” he says. “And what came to light was that we needed to introduce new asset classes.”
This will involve moving to more private assets and, on the public market side, looking to introduce more diversification and to actively manage the equity mix to get a good proportion of growth-type equities and low volatility equities to decrease the correlation between managers, he says.
Provident10 has already implemented some of changes, but the timetable is to complete the changes over the next two years, adds Malo.
“The way we want to execute on it is two-fold. One is to do much more of the heavy-lifting from our end. So getting tools that allow us to better understand managers, to see how the managers better fit in our portfolio, [and] to actually lead more of the investment searches. But also, at the same time, part of what’s unique here is we intend on building out the investment staff over the next year to two years.”
In terms of leadership style, Malo describes himself as very collaborative, valuing an environment that allows people to challenge ideas and ask questions, “. . . because usually that’s the only way you can take something that’s a good idea to make it a great idea.”
In this challenging market environment, the biggest opportunity is structuring a portfolio that can be more resilient to difficult market environments, Malo notes. “And that’s by introducing new asset classes that will prove to be better at coming market environments than the existing portfolio was.”