The Pension Blueprint podcast video transcript 

Episode 1 Transcript

Celine Chiovitti and Blake Hutcheson

Celine: (Voice Over) Welcome to an exciting new season of the Pension Blueprint. I'm Celine Chiovitti, Chief Pension Officer at OMERS, and your host. This season, we'll explore how retirement is evolving in a rapidly changing world. I'll be joined by pension leaders from around the globe, alongside experts in personal finance, longevity, health and human behaviour, as we unpack the trends, challenges and opportunities shaping retirement today, and for future generations. To kick things off, I'm joined by OMERS President and CEO, Blake Hutcheson, a familiar voice on this podcast since our very first season. An appointee to the Order of Ontario, Blake came to OMERS after leading Oxford Properties, and since 2020, he's led one of Canada's largest pension plans, a $151 billion portfolio, helping safeguard the retirement security of more than 675,000 members. We talk about navigating today's uncertain world, why long-term thinking matters more than ever, and how OMERS continues to deliver on its pension promise. So let's get into it.

Hello Blake, welcome to the Pension Blueprint.

Blake: Happy to be here.

Celine: Yeah.

Blake: Thanks for asking.

Celine: Thank you.

Celine: I want to get right into it. Earlier this year at the annual meeting, you framed the conversation about the chaotic world that we're living in. You talked about economic and political volatility. Um, I'd love you to touch on how you're feeling today. And I want you to think about it from three perspectives. First as the CEO of a $151 billion organization. Second as a Canadian, and then third as a father.

Blake: Oh my goodness. First of all, um, I just want to say thank you to you for all that you do for us. And the leadership you're showing and the team that you've built are formidable. You're a great partner and I want to make it very clear to everybody how grateful we are and how grateful I am to call you a partner. So, thank you. Listen, it's, it is a pretty crazy time out there. Um, geopolitics more than ever is, is noisy. Uh, the result is that economies ebb and flow in response to sound bites and, and the like, um, some very serious, like wars, some just, you know, insignificant tweets that can send markets into, uh, rhythms that we're not, we're not accustomed to. And the truth is in answer to all of the three questions, I am an eternal optimist. And I think as a leader in any way and in any form of life, you have to be realistic. You have to frame the problem. You have to recognize the problem. You can't shy away from the problem. You have to appreciate it and, and put your decision-making in the context of those problems. And that's being a realist, but then you have to be an optimist. You have to figure out there are ways to, as I often say, dance between the raindrops. There are ways to take negatives and turn them into positives. There are ways to get our team motivated to, to, you know, focus on the places where we can have control. And so as difficult and tough as it can be, I am always optimistic. And by the way, we've always found a way as a plan. OMERS for almost 65 years has delivered as planned, as expected, exactly what our promise was to every single pensioner. And so we have a 65-year history almost of delivering through difficult and turbulent times. And that is not going to change. That is our destiny. That is our DNA. I've lived through the whole real estate depression in 1990 when 7,000 lending institutions got wiped out in the United States and everybody thought this was the worst it's ever going to get. I've lived through the Russian ruble crisis where all of the currency markets around the world went into a tailspin. I've lived through the dot-com days when nobody could make sense of the markets. I've lived through the great financial crisis. We all lived through COVID. So as the CEO of the business, I am an optimist. I believe in our future. I believe in the team we've assembled. And I don't think our pensioners need to worry about short term hits or turbulence because we've got their back. As a father, same is true. Remain optimistic, remain positive, get behind your family, support their back. Let them know that we can get through these times together. And your third request was as a Canadian. As a Canadian, you know, this has been a wake up call for our country. We really since 1867 have had a deep relationship with one counterparty. It's been a very reliable one for them and us. It's still reliable, by the way. It is still intact. There are personalities that are out of alignment, but that doesn't mean our countries from a business perspective aren't totally aligned and intertwined. And so it's probably a gift because it's forced Canada. To, as we often say, get out of their parents' basement. What a gift. Get out there and get out and make it work for yourself. And that's been a moment for us. We're out of our parents' basement. We're making new friends. We're establishing new businesses. We're establishing new relationships. So we will see through this as a nation too, likely stronger than ever. And as a Canadian, I'm a true optimist.

Celine: I mean, we're still on question one. I think everybody can now hear why you are the CEO that you are. So thank you for that answer. I do want to talk a little bit about our investment strategy in the current economy and I guess ask you, is anything changing? Are you doing anything different? Are we staying the course? How are you feeling about the strategy as a whole?

Blake: In terms of our portfolio, Celine, today we are about 30% public and private credit, which is fixed instruments, predictable income streams. We're about a third equities. So a proxy for the market, investing in great companies around the world. And we're actually closer to 40% privates, real estate infrastructure, private equity. That hasn't changed a lot in the last four or five years. There has been some movement away from equities towards fixed instruments, largely because we're getting equity like returns with those fixed instruments and risk. And there's been some in recent years, opportunity to sell down some of our privates in terms of more liquidity for both our credit book and our equity book. But on balance, it's a fairly simple construct. It's been quite consistent over time. Everything we do starts with our liabilities. Then we design an asset allocation model around those liabilities. And more or less, each of the businesses we have is in the lane that we expect it to be in. Sometimes it gets a little out when we buy more right sizes. So during the cycle, the good businesses we bought and the strategy we've had has maintained itself. The areas where we when markets get too turbulent, we tend to take money off the table from equities. We've done a fair bit of that because we've had three years of double digit returns from equities. And when equity-type risk descends on us, it has in some of our privates, we find an opportunity to put more back into the credit portfolio. But it's a consistent portfolio. It's high quality. It's a long-term focus. Very seldom do we try to time some important trade this week or that week. Because as I often say to you, a quarter for us is not three months. A quarter for us is 25 years. We are always looking for the long-term best interest of our pensioners. And that has not changed during these turbulent times.

Celine: I think that's such an important message because I do think, you know, you talk a lot about diversification and the power of diversification and sort of, you know, all absorbing the shocks and just making sure we're here over the long term.

Blake: And I said, it was I learned it very early from a great Canadian investor. And he said, Blake, if you want to make a fortune, put all your chips on one square. And if you want to keep your fortune, you diversify. And for our plan, everything is about diversification. We diversify geographically, we diversify by asset class, we diversify by the clients and the verticals within those asset classes. And the broader our shoulders are, if there's a border war over here, the rest of the shoulders are the shock absorber for that period. That's the beauty of the diversification of our plan and our portfolio. And that has been a long-dated strategy of OMERS and it's serving us very well.

Celine: I want to come back to that, but I want to talk a little bit about dancing through the raindrops and the white space. And you're so good at, you know, you talk of - you are an optimist. I think you're very realistic, but you're always finding solutions to things as well. What are you excited about in the investment space that might be some new and emerging?

Blake: Yeah, it really depends on the vertical. As I started to say, the fixed instrument, the credit side of our balance sheet is in a period of sunshine, where you can get a high yield for a very conservative investment. As I say, equity returns without taking equity risks. In the infrastructure space, we've got 30 big assets, roughly $33 billion in infrastructure. Some of our big assets happen to be our best investments. And so there are opportunities to invest in those and enhance the asset value in those, as opposed to starting something new. So Bruce Power, for example, yeah, we own 50% of Bruce Power with TransCanada Energy, roughly 50%. It is our single biggest investment across the entire OMERS enterprise. It provides about 31% of the power supply for the province of Ontario. And it is in fact the largest nuclear plant in the world. And we are world class at what we do. And we're now refurbishing components of that plant with billions of dollars. That's a magnificent investment for us.

Celine: It's, I think people are really waking up to the financial engine that pension plans are and the amount that you bring to economies. And I guess somewhat related to that, you recently talked about investing more in Canada and investing $10 billion in Canada. Can you talk about why? Why now? Why is it the right time? And what are you excited about?

Blake: Well, listen, Canada is still around 2.5% of the global GDP. United States is approaching 25%. And so, and which would follow their roughly their economy is roughly 10 times ours. And so if you allocated your portfolio on the basis of GDP alone, you would suggest that Canada would get a small percentage of the book in the 2.5% range. The truth is we've been hovering between 15 and 20%. We are comfortable investing at least that amount in this country. We have deep relationships. We understand the Canadian currency. We understand the rule of law. We've been established here for nearly 65 years. So as a fiduciary of the plan, and I'm speaking to all of our pensioners here, we don't, you don't want us to, and we can't invest in Canada because someone requests us to do it or because it's the right thing to do, because it's a nice thing to do. Because as fiduciaries, we have to return for our pensioners the absolute best risk-adjusted return. So, and we've had pressure from parliamentarians, from prime ministers, from premiers. Hey, would you please do more? My response has always been the same. This is not your money, premier or prime minister. This is not my money. This is our pensioners' money. But I'll tell you what, when you bring us opportunities and you create opportunities for us to feel that this country is more investable, we'll be the first to jump. We're sensing that. And so we see at least $10 billion of opportunities in the next five years. Our pipeline for Canadian opportunities in infrastructure are bigger than they, bigger than it's been in a decade. The same is true for real estate. When we invest in this country, it serves our pensioners beautifully because they're going to do well. And when those two things combine, I think society wins. I think the pensioners win. I think we all win. And we're really ambitious to do more here.

Celine: I love that. That's great. So I have the pleasure of traveling around this province with you quite a bit. And every time we go anywhere, you get, you know, people surround you and ask for, you know, personal financial advice. I tell you, you're not allowed to give any personal financial advice. That being said, we are talking a lot about money right now with our members. We have a younger generation starting in the workplace. We've already talked a bit about it's a really difficult environment. And, you know, one of the great things that our members have going for them is they have access to a pension. And so they are saving for their future, but sometimes it feels really, really difficult. And so I want to go back to your father hat, if you were talking to your kids talking about, you know, what is one or two, what is a good financial habit? If you, if you would share that people could start early in life, if they don't have a ton of money, but maybe there's a little bit of money left over at the end of the month after paying all of their bills. What might I start thinking about doing?

Blake: Well, first of all, and I hope people know this, because I'm sure there are days it feels like a burden to see this much of your paycheck taken off and put into this thing called OMERS. It is a blessing because it's a discipline that accumulates over time with a body of people who care deeply about final outcomes, who've paid pensions on time and this plan for 65 years. And when you're ready to retire, you know, with certainty that that amount of money will be substantially able to sustain the lifestyle that you've created. So the single best investment people can make is this sort of disciplined opportunity to accumulate wealth over time during their working career. So there, those who are blessed to be on these plans as a head start, very fortunate. They're game changers. Investment for anyone in the Western democratic country, Canada included, is a home, but foundationally, your pension tick to the extent a home is an opportunity tick, risk-free treasuries tick, and then you can get further out the risk curve with help in other equity. Those are thoughts.

Celine: I think that's great. And I think it speaks to the fact, and it's a lot of it speaks to how you think strategically about the organization. For anyone looking to, you know, just starting a career, and we did an episode with the municipal sector and just like purpose at work, and you have access to a pension plan and access to a DB plan to me should be one of the fundamental things you're looking for when you are starting out a career because I do think it's a game changer and an equalizer for so many people.

Blake: Well, and for those in our plan, and you and I know this, a promise is a promise.

Celine: Yeah.

Blake: You're paying in. You're committed. You're showing discipline. During our tenure for future generations of the custodians of this plan, a promise is a promise. We owe you that pension.

Celine: Yeah.

Blake: It will come your way. We will find a way, always have for the last almost 65 years. Yeah. And we're going to, you and I have a job to set it up for the next 65 years.

Celine: We do. We do.

Blake: Yeah.

Celine: Okay. I want to change track a little bit here and talk about leadership. Anyone who works with you, I think we lovingly refer to these Blake-isms and I'm going to say a few of them. Leave the campsite better than you found it. Business travels at the speed of trust. And of course, stop mixing and start painting. To me, those are three examples of so many. They speak to the importance in my mind of the values that you project around excellence, around relationship, around trust. Can you speak a little bit more about what that looks like for you as a leader?

Blake: Well, I think particularly with these smartphones and the information age and the interventions from technology, it's more important than ever to have human contact. It's more important than ever to have personal relationships. It's more important than ever to take whatever facts are on the table. Because everybody can read facts. I see facts as sheet music. You can read the notes, but who can sing them? Who can take them off the page and turn it into a song? Computers don't do that for me and personalities and relationships do. In terms of trust, there was a really good op-ed piece by Shultz who was the Secretary of State for Reagan back in the day. And George Shultz was, I think he just passed his 100th birthday and he wrote an op-ed piece in the Washington Post that said, "If I can give any gift to the world before I depart it, I want to tell you my view on trust." This is someone who'd had a military career, an extraordinary business career, an extraordinary government contribution. In his life, he said, "Trust is the currency of the kingdom. It's the golden realm. When it's in a room, anything's possible. Good things happen. When it's not in a room, nothing's possible. Bad things happen." You name any room, whether it's the classroom, whether it's the locker room, whether it's the family room, whether it's the boardroom, whether it's the union hall, any room, when there's trust, great things happen. So if you start with a relationship with trust, it's amazing what you can get accomplished in life. So then you go back to some of my expressions, having grown up in Huntsville, Ontario for generations, our family said, "Hey, our job is to leave the campsite better than how we found it." We were all given a hand. Here are your cards. You get some threes, you get some eights, you get some face cards. How can you turn that hand into something infinitely better for future generations? And I and you stand on the shoulder of all the giants that came before us here at OMERS. Stop mixing and start painting. That's also a family expression. You sit around the table and do a lot of talking. There's a time to stop mixing and start painting. And from my perspective, I see governments do it all the time. The mixing part. I see corporations can get clogged up with bureaucracy and blockers. So I'm a person that wants to see the action. And yes, we have to be thoughtful in the front end, but then there's a time to get on with it. And make things happen. And that's what we try to do every day.

Celine: I couldn't not ask about AI. And I know we've spent a lot of time in the organization exploring it and thinking about, to your point, what are the human skills that we really, really need to hire for? And then how do we leverage AI? And then there's the risk around Claude Mythos and all that. I don't want to get into all that, but just how are you thinking about this space?

Blake: It's quite interesting. Our board asked that question, as you know, every cycle and they must. A board is responsible for governance. And with that trend being so hyperactive, they have to turn around and say, "Hey, CEO, how are you thinking about it?" If we ran a manufacturing company that made one product, then I think it would be my job as the CEO to say, "This is the risk of these, and this is the opportunity of AI. This is what it brings to the table. This is what it doesn't bring to the table. This is how we've adapted the organization to deal with it. And like anything, there are risks and opportunities." And I would give them a prescription as to how we're dealing with it as a plan. When they ask this CEO, we are a far-flung organization, global in our scope, with a litany of different businesses and verticals. So my job isn't to try to prescribe from my office how we deal with AI. My job is to then ask every single division and component of our business, "How are you looking at it? What's the risk? What's the opportunity?" By the way, if you don't have the skills, we'll provide you with the tools to unlock how it affects your business. So we now have a training program that we're rolling out through our human resources team, to every single one of us, that helps us adapt for our own purposes, how to better address those questions, threats, and opportunities. And it's real. It is not going to come and go. It's moving so many of the components of our business forward at a breakneck pace. So let's get in the game. Let's train our people to be on their toes. We will need to retool some of our people. We will need to hire some people that have skills that we don't have. But like anything, let's be proactive, not on our heels. I think we are being. And I think the opportunities are at least as great as the threats.

Celine: Okay. I want to wrap up just with a few personal questions and points. And you talked about growing up in Huntsville. I know how much that means to you. And I know that you continue to play Masters Lacrosse for your town of Huntsville. Talk about that. Why is that still so important? How long have you been playing?

Blake: Don't ask.

Celine: Yeah, no, no.

Blake: Our family have been in Huntsville for almost 150 years. And it's a lacrosse town. In Ontario, there's seven or eight lacrosse towns. I happen to be fortunate to be born in one that we had great programs as kids. So I've played since I can remember. And then I played junior and I played senior. And then there's a Masters League that's 35 and older. So I'm not telling you how many years. You'll know, but the rest of the people out there are going to know. But now decades, I've been playing again for my hometown. But they're all people I know. They're families I know. Without any exaggeration, if we have 15, we have four tournaments a year. They're four or five games a tournament. We stay in a lousy motel somewhere and support each other. Without any exaggeration, if we have 15 a weekend, at least six or seven are OMERS members.

Celine: Oh, wow. So that's incredible.

Blake: Some firefighters, some police, some people who work for the municipality up there. And they have my back on the floor. I have their back in life. And so it is, listen, it's been a- when you grew up in a little town, the exposure you have as to how a greater society works is a blessing.

Celine: I love that. So what is your happy place? If you could close your eyes and just wake up somewhere in the morning, where are you happiest?

Blake: I don't think you'll find this an odd answer. I like working.

Celine: Yeah.

Blake: I like working with and for amazing teams. I like waking up with purpose. I like knowing we can make a difference. If I want peace, my hometown of Huntsville, Ontario will always be home. And so we have a little place on a quiet lake with family around us and pets and nostalgia. And real estate, Celine, some people think of it as four walls. I think of it as memories. And so a lot of the real estate in that part of the world, I've shared for generations with our family. So it's a very happy place for me.

Celine: Thank you. You are awesome. I think anyone listening today will appreciate that 675,000 Ontarians are very fortunate to have you looking after their financial future. You wear your heart on your sleeve, you care so much. And we are all very fortunate to have you. Thank you for joining us today.

Blake: Thank you, Celine, for your partnership and your great work. And I think on behalf of our entire organization, thank you for the privilege to work for the 675,000 hardworking Ontarians. We will do our level best with every ounce of our being to do exactly what the plan has done for nearly 65 years, which is to deliver on a promise. A promise is a promise. And that's what we're here to do.