The Pension Blueprint podcast video transcript

Episode 1: A CEO’s viewpoint: What’s ahead for 2030

Celine Chiovitti (VO): Hello, and welcome to our exciting new season of "The Pension Blueprint." I'm your host Celine Chiovitti, Chief Pension Officer at OMERS. In my day-to-day work, I have the privilege of seeing how our various teams work together to deliver the pension promise for our 640,000 members across Ontario. This season, with insight from both internal and external experts, we take a deeper look at issues that impact all of us regarding pensions, personal finance, the gender pension gap, AI's impact on retirement, and more.

To get us started, it felt appropriate to sit down with a captain of our ship, President and CEO at OMERS, Blake Hutcheson. Blake is an appointee to the Order of Ontario and a former recipient of Canada's Top 40 under 40, as well as a graduate of the University of Western Ontario. In this one-on-one with Blake, we talk about how he and the rest of the OMERS leadership team are charting a course through the current economic and political environment, and keeping the security of our members as priority number one. We also get to know him a little more as a person outside the walls of OMERS.

So without further ado, my conversation with Blake Hutcheson.

Celine Chiovitti: Hello, Blake, welcome to season three of "The Pension Blueprint."

Blake Hutcheson: Good morning, Celine. Thanks for having me.

Celine: It's so hard to believe that we are actually in season three. You've been here three times already, and I don't want this to go to your head, but you're a bit of a fan favorite.

Blake: Well, put me to work, my friend, anytime. Anytime. And I think you do a great job, so it's fun to be here with you.

Celine: Thank you. Well, you were the most downloaded and listened-to episode in season two, so let's get right into it.

Blake: Okay.

Celine: So when you think of OMERS books, your investment strategy, we have about 50% of our assets invested in the US, again, going back to tariffs, and we've got 28 billion, I believe, invested in Canada. Are you seeing anything different? What are you watching for right now?

Blake: If you look at the strength of OMERS, it actually goes back to our foundation because for the first 30 or 40 years, OMERS was a small, Ontario-based plan, primarily focused on hiring others to invest its money, primarily stocks and bonds, but around 1990, we started to build our own private muscles. So we started getting into the infrastructure business, we bought Oxford Properties in 2001, we set up our own private equity business soon into this century so that we had a diverse portfolio and a diverse group of people deploying our capital. And then for the last 15 years, we've diversified globally, and a very wise investor told me many years ago, "If you want to get wealthy, put all your chips on one square, and if you want to stay wealthy, you diversify." So OMERS just keeps broadening its shoulders, first by asset class, then building the strength of our investment teams, and then going global.

And today, Celine, we have really 10 global offices. We have more than that, but 10 primary ones, 14 time zones. We've got roughly 30 big infrastructure assets representing $30 billion, roughly 25 big and powerful private equity businesses invested here, primarily in this continent, some in Europe. We have 850 real estate assets through our portfolio Oxford, and at any given day, we have between 30 and $40 billion in credits, fixed instruments, private and public credits, and equities. Today, our equity's roughly 140 billion and our balance sheet's roughly 250 billion, which includes debt. And when you layer in third-party capital, we're fast approaching 350 billion. So it is a sizable enterprise, Celine, and we think between now and 2030, we'll be four to 450 billion of assets under management, almost a half a trillion dollars.

Celine: Almost a half a trillion dollars.

Blake: On behalf of our members. Yeah. Incredible. So in the US today, we have a little more than 50, it ranges between 50 and 60% of our exposure to the United States, and so on a balance, it feels right to deploy about that much in America. And notwithstanding the noise and notwithstanding how one might feel temperamentally about what's going on there at this particular time, it is still the strongest economy. It is still providing us with extraordinary opportunities. If you look at our Canadian GDP, it's less than 3% of the global GDP. It's probably 6% of the investible universe of the countries we invest in, but it's actually, for us, we hover somewhere around 20% of our portfolio in Canada, and we like the currency. We have a home-court advantage, we have deep relationships. We understand the rule of law, and we own extraordinary assets in this country. And when anyone criticizes pension plans for not investing enough, that's not directed at OMERS.

Celine: Yeah.

Blake: To our members, you out there, you own Yorkdale, Square One, Scarborough Town Center, all with partners, Shadow Lake Louise, Jasper Park Lodge.

Celine: The most iconic hotel.

Blake: Iconic hotels. Great office product.

Celine: What about the Maple Leafs, Blake?

Blake: A small piece of the Maple Leaf Sports and Entertainment, the Raptors, the Leafs.

Celine: We're not going to hold the loss against you this year, but next year might be our year.

Blake: Oh my goodness, let's hope so. It's only been 59 years.

Celine: Yeah, there you go.

Blake: But Bruce Power, we own 50% of Bruce Power. We own Ontario's land registry system. So I like our diversification. It is serving OMERS well. I like our global reach, I like our exposure to Canada. Our exposure to the United States is sensible. I think we're really well positioned to see through this period. So the truth is the diversification is real, it's complicated, and yet that's what allows us to see through cycles is having, if one market's down, the other market's up, if one asset class is weakened, there's often an equal and opposite effect to strengthen the balancing of our portfolio. We have a strategy that's really clear.

Celine: So can you speak a little bit more then about, I'm going into the minds of our members of listeners and the world feels uncertain, the economy feels uncertain. We've had a number of years now of economic uncertainty. If I have my own portfolio that I'm trying to manage, it's hard not to pay attention to all of the noise. You talked a little bit about high-quality investments and diversification. What sets us apart? Why is our plan so resilient than the other sort of Maple Eights? Speak a little bit to the fundamentals around that for Ontario.

Blake: I think we're doing a really credible job for the plan. And the beauty of a pension plan is we can think long term, and so many people with their private portfolio need immediate cash flow, and they're trying to time the market and trying to get it right, which is impossible in an environment like this one with leaders waking up and changing the rules of the game every day, and you see the volatility that that creates.

And so what we do is we see through cycles, I often say a quarter for us is not three months, a quarter is 25 years. In years like this, when great equities, for example, are hit hard because of one tweet or one comment or one sort of series of decisions that affect economic stability and certainty and confidence, we've been loading up and buying those very equities with great dividends. Stocks that last year were 30 or 40% higher than they would be this year, and so we've been very strategic in thinking about the future, thinking long term, not worrying about this quarter or next, will those equities come back this year? And so by year end, will that prove to be a spectacular decision? I don't know, but do I think buying at deep discounts some of the greatest securities and companies, by the way, that we could possibly buy in a down cycle? Do I think that they'll stand the test of time for us? 100%, I do. It may not happen this year, it may not happen next year, but over time, we have the advantage of thinking that way, which is part of what makes us resilient, which is part of what gives us purpose, and which is part of what allows us not to try to time cycles to precision, but make good decisions over the long term.

Celine: I think that's great and I think it really speaks to, we started off by saying we've been paying pensions for over 62 years, and that is the value of the defined benefit plan.

Blake: Doesn't matter, you don't need to worry about the noise and paying attention to it. We are doing that for them. Your team is doing that for them. And as a result of that, it doesn't matter how old you are, we will continue to pay pensions for the rest of your life. That is our pension promise. A promise is a promise, last time I checked. That’s real to us. And I've often said, Celine, a pension doesn't know what happens to the economy on a given week. Interest rates, inflation, what a politician may add or not, a pension just knows one thing and it knows it needs to get paid. And when it needs to get paid, it makes our life really simple. That's why we go to work in the morning to make sure that people are looked after. They've paid in in good faith, they have earned it, they deserve their pension. And you and I, as I say, will do everything we can, not only for the next 10, but for the next several decades to ensure that our good members are looked after exquisitely as they deserve.

Celine: Yeah, 640,000 strong right now.

Blake: Amazing, right?

Celine: So you talk about the resilience of the plan and the fact that we've been paying pensions now on time and as planned for over 60 years. Our youngest member is 14 years old. Our oldest member is 109 years old and has been receiving a pension for over 40 years. When you think about resilience and being there for the 14-year-old, what does that mean to you?

Blake: Well, first of all, heart goes out to the 109-year-old. Let's hope it's 110 soon. Yes. And we can celebrate, 'cause you send out cards.

Celine: I do. I just signed a whole slew of them. We have 335 centenarians in the plan today.

Blake: Amazing, amazing. Great story. Yeah, listen, when we plot the resilience, we always have a strategy that's consistent for the times. And so up until recent history, we've been taking in more from our pensioners than we pay out, so we've had a surplus. In recent years, that's reversed. So that we do have a negative money in/money out delta that we have to cope with. As we look at it for the next five, 10, 15, 20 years, and we've modeled it, it'll never be greater than 2% of the asset base. So while the number may grow, it's a very manageable outflow, and it doesn't mean we are concerned about it in any way. It just means we will design our portfolio with a little more income to provide for that than we historically have, where we've usually had more capital appreciation. So it's good information for us to plan for. It's not daunting. Okay. I'm confident we get there, and as we see through the decades ahead, it's highly manageable, and we may have to morph our strategy from time to time for more income and a different asset class model than we currently have, and that's life when you have multi-generational pressures and new obligations as the different cohorts roll through. And certainly, you live with the various generations that are affecting the plan in different ways. Our actuarial teams and scientists model that all into the mix.

Celine: So talk a little bit about 2030. You've recently got our OMERS 2030 strategy approved by the board, and I know you talk about the one, two, three, four, five. Can you tell us what the one, two, three, four, five is?

Blake: Well, everybody needs a strategy, right? And, whether you're a government, whether you're a company, frankly, I've always had a personal strategy for five, 10, and 15 years so that I know when to say no and I know what to focus on. So we have, with a very thoughtful group within our organization and deep input from you and your team with gratitude, Celine, put together a strategy that I think makes absolute sense for us between now and five years hence, and so the north star of that strategy, as we say, is one, two, three, four, five. So that all of our 3,000 employees know exactly where we're headed. I would submit to you that all 3,000 could give the one, two, three, four, five.

So one stands for 100% funded plus. We think we'll be greater than 100% funded between now and 2030. In the last few years, we hovered just under 100%—call it 97, 98, 99—and where we're headed clearly is 100% funded plus, goal number one.

Goal number two will be 200 billion of equity. So two stands for 200. Today, we're a shade under 140, depending on what day you look at it, billion of equity. We believe with reasonable, thoughtful processes and procedures and strategies between now and five years hence, we will then be 200 billion of equity.

Three stands for three continents, and those are the 12 countries that I've referred to. And really within those countries, one or two cities, and so when people talk about the general economy of the UK, for example, it doesn't matter to me what the general economy of the UK has in store. It matters to me what's really happening in city center, London, in a few ports, in a few of the strategic areas that we've invested in that city. And we can study it, study it, study it so that we understand those fundamentals. So three stands for three continents.

Four stands for 400-plus billion of assets under management, and that includes our equity with some modest leverage plus some third-party capital. And as I say, we think it should be approaching four to 450 billion of assets under management. Half a trillion dollars. Four stands for 400 billion.

And five, when we deliver a 5% real return, and real return means without inflation, so that's more akin to a 7.5 to 8% nominal return with inflation, but five real. Five plus inflation. 100% funded, $200 billion, three continents, 400 billion-plus of assets under management, 5% real return, delivering an unbelievably healthy story for the pensioners for the next decade to follow. That's the story.

Celine: I love it. It's simple. You can understand it. It's ambitious.

Blake: And you know what? I find that almost the best part about a plan is you know when to say no.

Celine: Yeah.

Blake: When people throw ideas at you, when you're focused on what you're great at and what the team is great at, we know where we're headed. We don't waste any time getting sidetracked by things that aren't on strategy. Yeah. And that utilization of our time allows us to be focused, allows us to really be disciplined about where we're headed, and when we are all those things, I like our odds.

Celine: So Blake, I want to bring our conversation back to Canada, and I was in the audience when you delivered a letter to Canada at the Toronto Region Board of Trade dinner. I know it’s been all over social media; it’s been in various publications. I had the honour of sitting in the room and listening to it. And I can tell you especially in that moment in time it was truly remarkable to sit in the audience that day, and you delivered something I haven't heard you do before, which was a letter that was raw, that was vulnerable, that was very honest, and that gave us some really tough truths about Canada. I wanted to read a few excerpts from it and then ask you about it. And so it starts off like this: “I am a guy who grew up in the small town of Huntsville, Ontario. An idyllic typical Canadian community that reflects the values and virtues of our nation. I could not have asked for a more wholesome and hopeful upbringing we were a humble community and admittedly we had a lot to be humble about yet we knew what a neighbour was how consistent friendship and allyship worked how any local success enriched us all. A town where kindness meant strength not weakness by your example Canada we were each other’s keeper.” You went on to talk about your father and grandfather and their entrepreneurial lessons and how they built their business from the ground up and supported the local community. You go onto talk about some of the things we need to do better. You say “although I’d like this speech to begin and end as a love letter to you Canada the reality is we all have some hard work at hand we have a real conundrum on our hands and we must admit despite our many advantages we find ourselves falling behind.” You actually end with three calls to action that I love: the first draws from you grandfather and is about trust and having the tough conversations so it’s easy to criticize our friends in the US but instead of doing that let’s tell our story and bring people together the second comes from your father’s favourite word which it’s “finitiative” so let’s figure out what we can control and get it done. And the third I call this a Blake ism it’s about fiercely competitive and incredibly humble. I welcome anyone to read this letter and speaks to how we should be living our lives right now. I wanted to ask you what was going through your mind at the time and what did it feel like to deliver this to Canada.

Blake: Well, first of all, I was asked to speak, it was the 135th anniversary of the Board of Trade and I was asked to be one of the keynotes, and it was a big dinner. I don't know how many, at least 1,000 people. There were a lot of people in there. And so, like many times when you speak, you start to think about it a week in advance as opposed to a month in advance, and I sat down that weekend, and I kid you not, my pen just felt compelled to write and my heart just started to flow. And I sat back and thought, you know what, I've never thought about writing a letter to Canada, I've never seen anybody else take that lead, but to me, the speech just took the form of a letter to Canada. It was, at the time then, when the rhetoric around the 51st state was very high. It was around the time that the idea of secession was not impossible. My entire life, it's been a zero percentage chance. And I think we all needed to come together and show our strength and our solidarity.

So it kind of drew on a lifetime of my experiences. I did grow up in a little town where the handshake meant something, and allies weren't to be dismissed and mutually beneficial relationships were patently beneficial to all those who were involved, and it's not a zero-sum game in life. And that's how I roll and that's how Canada rolls. And it's not the message we are getting from south of the border, and so we had to frame the context.

I wish it could be a love letter, but it isn't, Celine, 'cause there's a lot of hard messages that have to be delivered to our country right now to get our act together, and one of the things that I said, which I fundamentally believe, is our great wealth in this country isn't just the oil and gas and the strong financial system. It is, in fact, our people. It is, in fact, the great Canadians and the grit that they possess that are going to get us from here to where we need to get as a nation. So it was just one of those moments in time, I thought it was a message worth sending. I hope if you make it available to people, they can interpret it in their own way, and it happened to coincide with a moment in history where our very sovereignty was in question.

I think it also said, 'cause I mean it, there are a few nations that wear their pride and their patriotism on their sleeve perhaps better than we do. Doesn't mean that they are more proud or patriotic than we are as a country. We just don't celebrate it the same way. And our patriotism is intact and we are not for sale. And it's a message that's worth resonating. And now, let's pivot, let's recognize the strength that this country has, let's recognize that we have as its citizenry. And let's pick up and make sure that we use this time to the advantage of all Canadians and use our platforms and invest in This country and invest in each other and not sit idly and let anybody try to abuse us in unfriendly and unneighborly ways. It's not our style.

Celine: It's a great message, Blake, and I really appreciate you sharing it with everybody. Okay, we're going to end with a series of fast five questions, which are just fun short questions to allow people to get to know you better. You're up for it?

Blake: Go for it, my friend.

Celine: Okay, first thing you do in the morning.

Blake: Well, historically, I exercise.

Celine: Good answer.

Blake: I try my best to do it. It's probably five days a week. It's not seven. I have a fitness person that I patch into at six twice a week for sure, and I've been a runner. I hurt my knee playing lacrosse last summer, and so this is the first year in my time on the planet that I haven't been running as much. I did go for a run this morning.

Celine: Oh, there you go.

Blake: I'm starting to get back at it.

Celine: Great. So the one thing I try to do is I try to exercise. Why? Because I can control the time at six in the morning. And once I get my day started, no matter how much I'm ambitious to find a time during the day, somebody else's priorities usurp mine. So exercise every morning. And I also, and I'm really grateful, I still love a real newspaper, but I have the digital. There are three papers that I patch into, and I can't say that I read them, but before I go anywhere during the day, usually with a cup of coffee, I do my exercise, I get my coffee, and I start to pour over the papers so that I don't get shocked when I go to the office and someone trumps me on some news that I missed.

Celine: I love a real paper. To me, that's a Sunday.

Blake: Yeah, me too. Sunday morning delight.

Celine: Me too. Is a real newspaper.

Blake: I designed a kitchen table so that my dear bride and I had enough room to both read our newspapers.

Celine: I love that.

Blake: Once upon a time, so we could have our coffee and we could wake up in the morning, and now with the digital stuff—It's not the same. It's not getting as much use, but I do love it too. Yeah, that's a Sunday morning treat.

Celine: Okay, last thing you do at night.

Blake: I have a half great Dane and half husky. Her name is Boo. She's sensational. She and I go for a walk, so whenever I'm ready, even last night I was working 'til quite late, and Boo comes and tells me when it's bedtime and we go for a little walk.

Celine: She keeps you honest.

Blake: And so that's my last, and to the extent we get to bed at the same time, I've been with my dear Sue for 35 years, so we usually have a little chat, just touch base.

Celine: That's lovely.

Blake: Remind each other how lucky we are.

Celine: That's so good.

Blake: And I pat my beast of a dog and off to bed.

Celine: I love that. Okay, favorite restaurant in Toronto and what's your order there?

Blake: Well, there's only one choice, right? 'Cause we happen to own it. So we own the—

Celine: I know where you're going.

Blake: The Park Hyatt. It's pretty. And that means you, the members, own the Park Hyatt. And we bought it, well, just before COVID. We renovated it, in my view, exquisitely. It's doing great as an investment for our members. And it has a restaurant at grade, which is pretty simple called Joanie's, which is great, and as importantly, the 17th floor. And if anyone hasn't been there, get there. 17th floor, there's a bar/restaurant with the best views of the city.

Celine: Best views of the city.

Blake: I don't care what other hotel thinks it can hold a candle to us, they can't. The hotel that we own is the best in this city and those views are the best in this nation. And they both got good restaurants, reasonably simple food. Usually when we go there, it's family style, so I can't say what I like the most, but it's great. And by the way, we own a lot of malls and a lot of office buildings. Any one of our Oxford owners' food courts, I'm kind of partial about those. That's the rule of thumb, any Oxford property's best. If I can create more wealth for our members with my own eating habits, that's not so bad. And the same is true for everyone out there, by the way.

Celine: Yes, I agree. Yeah. Okay, you have 48 hours, excluding travel time, to go anywhere in the world. Where do you go, what do you do, and who do you bring with you?

Blake: No, I'm really simple. It's back to my roots, back to Huntsville, Ontario. My grandfather always used to say about Toronto that the only thing decent that ever came out of the city of Toronto was the highway to Huntsville. It often goes over well when we talk to our members in any place but Toronto.

No, listen, I've got a cottage up there, happens to be beside my dad's cottage, and many of our family are in and around that same little lake just outside Huntsville. So I'd go there anytime. I'm most at peace there. I have lifetime friends there. I have lifetime family there. My dad, I don't think I've ever been there for the last 50 years without hanging out with my dad, so quite blessed to do that. So that's home for me. That's where my heart is in many ways.

Celine: That's great. Thank you so much, Blake. Honestly, thank you for being here. Thank you for everything you do on behalf of 640,000 plan members. Really appreciate you and I appreciate you being on our podcast today.

Blake: Well, Celine's now been doing this for three years, and this is a small sampling of the leadership that this incredible person and special person and executive shows for us, for all of us. I know you care deeply about our members. I know you come to work every day in service of the right thing, showing the right values. This is another indication of that. I can't thank you enough. You're a great partner and a great friend. So thank you for staging this for us.

Celine: Thank you, Blake. Thank you.