Sean Conlon and Pia Sinh of CNBC report the Dow closes more than 500 points lower after hot inflation report, mounting concerns about AI impact:

Stocks dropped on Friday after the latest producer price index data came in much hotter than expected, adding sticky inflation to a list of concerns that has caused market turbulence this month.

The Dow Jones Industrial Average dropped 521.28 points, or 1.05%, to close at 48,977.92. The S&P 500 closed down 0.43% at 6,878.88, while the Nasdaq Composite lost 0.92% to settle at 22,668.21.

The S&P 500 and Nasdaq finished in the red for February amid growing fears about the impact of artificial intelligence on specific industries and the overall economy. Those fears were exacerbated after Jack Dorsey’s fintech company Block said it’s laying off more than 4,000 employees — nearly half of its workforce. Stocks in the financial sector and other areas of the market tied to the economic cycle pulled back Friday.

Stocks linked to private credit were under pressure again as investors anticipated that they could be potentially suffer as a result of UK mortgage provider Market Financial Solutions’ collapse. Apollo and Jefferies were among the laggards, dropping more than 8% and 9%, respectively. Shares of Blue Owl, which has been hit recently in the wake of its liquidity curbs and asset sale, fell about 6%.

Notable software names suffered losses as well Friday as they close out a terrible month. Salesforce tumbled more than 2%, as did Microsoft, which weighed on the Dow. Cybersecurity company Zscaler shed 12% after deferred revenue and billings in the fiscal second quarter missed expectations. CoreWeave fell 18% on disappointing guidance.

Nvidia extended its post-earnings slide with a 4% fall Friday. The stock shed more than 5% on Thursday, a surprise to many investors who remain bullish on the chipmaker given its blowout fourth-quarter results and upcoming product cycle. Market participants attributed the decline in shares to doubts around Nvidia’s deal with OpenAI, weak sentiment over the AI trade and skepticism about whether hyperscalers’ lofty AI capital expenditures are sustainable.

Fueling the downbeat sentiment, January’s producer price index — a measure of wholesale inflation — showed a 0.5% increase for the month. Economists polled by Dow Jones saw the headline reading coming in at 0.3%. Perhaps more concerning is that the core PPI reading, which excludes food and energy prices, recorded a 0.8% gain, much more than the 0.3% rise economists anticipated.

Stephen Kolano, chief investment officer at Integrated Partners, views the PPI report as an additional complication for investors on top of the already-existing anxieties surrounding not just AI capex and the risk of its disruption to industries but also other factors such as stress in the private credit market. Noting that the inflation reading seems to be more services driven, he thinks it’s a sign companies are possibly starting to pass through the cost of tariffs to the end consumer in order to maintain their margins.

“Inflation isn’t solved yet,” he said, adding that it creates this conundrum for the Federal Reserve of deciding whether to cut interest rates to spur growth or to hold steady to continue to fight inflation. “It just creates this uncertainty around which way is policy going to go in the remainder of the year.”

That’s not to mention the state of the labor market as another worry, Kolano said. Even though job growth last month was much better than expected, the investment chief said he isn’t sure that the labor market is stabilizing given that layoffs have been picking up. In fact, Challenger, Gray & Christmas reported earlier this month that layoffs in January hit their highest total for that month since the global financial crisis.

“I don’t see a clear sign that unemployment is not going to move higher just yet,” he said.

The Nasdaq posted a decline of more than 3% in February, seeing its worst monthly performance since last March. The iShares Expanded Tech-Software ETF (IGV) is down nearly 10% for the month, bringing its year-to-date losses to almost 23%. The S&P 500, meanwhile, recorded a loss of close to 1% in February, while the Dow climbed about 0.2%. 

Rian Howlett  ,  Karen Friar and Jake Conley of Yahoo Finance also report the Dow, S&P 500, Nasdaq fall to end volatile month as AI worries buffet markets:

US stocks sank on Friday after a measure of wholesale inflation came in hotter than expected and Block's (XYZ) surprise shakeup turned the spotlight on AI disruption risks.

The Dow Jones Industrial Average led the way down with a loss of 1%, or more than 500 points. Meanwhile, the Nasdaq Composite fell 0.8%, while the S&P 500 dropped 0.4%, respectively, on the heels of sharp closing losses for the tech-heavy indexes.

The Dow barely eked out a gain in February, keeping its nine-month winning streak intact, with the blue-chip index rising 0.17% for the month. The Nasdaq and S&P 500 declined more than 3.3% and 0.86%, respectively, for the month.

Ongoing worries over private credit rippled through the market, while concerns that AI could wreak havoc across a swath of industries also came into focus. Those fears were stoked on Thursday when Block co-founder Jack Dorsey said the fintech will cut nearly half its workforce due to AI productivity.

Elsewhere in corporate news, Netflix (NFLX) shares rose after the streaming giant abandoned its pursuit of Warner Bros. Discovery (WBD). That left rival Oracle (ORCL)-linked bidder Paramount Skydance (PSKY) to clinch a buy of the Hollywood studio, giving its stock a boost, too.

On the macro front, January’s producer price index rose 0.5% month over month, showing that wholesale inflation grew at a faster pace than the 0.3% rise economists expected. Core PPI — which excludes volatile food and energy prices — of 0.8% for the month also exceeded forecasts of 0.3%.

Looking ahead, Berkshire Hathaway (BRK-B, BRK-A) CEO Greg Abel is expected to publish his first annual shareholder letter on Saturday, after taking over from Warren Buffett. It will come out alongside the conglomerate's quarterly and 2025 update. 

Software got punched in the gut in February

It's fitting that February ended with another tech sell-off led by software, as the iShares software ETF (IGV) dropped roughly 10% for the month after probing last summer's lows earlier this week. 

A few names bucked the trend — RingCentral (RNG) gained about 40% while Cisco (CSCO) and SAP (SAP) were little changed. But the story is the breadth of the red and the technical damage.

Microsoft (MSFT) is down almost 9%, wiping out over $270 billion in market capitalization, while Oracle (ORCL) fell nearly 13% for a $60 billion drop. Palantir (PLTR), Intuit (INTU), and Palo Alto Networks (PANW) each shed about $25 billion.

On the other end of the tape, the biggest drawdowns were ugly: Unity (U) and Atlassian (TEAM) were both off over 35%, while Asana (ASAN) declined 30% and Zscaler (ZS) only a little less.

Alright, another crazy week in the US stock market, where we once again saw more selling of tech stocks in general, including beaten-down software stocks, although they look to be bottoming here.

Here are this week's best-performing large-cap stocks (full list here): 

Among them are Paramount Skydance, Netflix, Dell, Block, and Thompson Reuters.

And here are this week's worst-performing large-cap stocks (full list here):

 Among them are Novo Nordisk, First Solar, KKR, and Apollo Asset Management.

 More impressive this week were how some of the mid-cap stocks rallied hard (full list here):

 

Among them are Applied Optoelect, Palvella Therapeutics, Iovance Biotherapeutics, and 10X Genomics.

Now more than ever, it's a market of stocks; you really need to pick your spots carefully. 

In other big news, cutting nearly 40% of its workforce, Block loudly professed that the days of AI taking the jobs of humans has arrived. 

Is a massive AI deflationary wave in the making? Maybe, too soon to tell. 

Alright, enjoy your weekend, that's a wrap.

Below, BMO Senior Equity Analyst Brennan Hawkin joins 'Closing Bell Overtime' to talk the state of the private credit markets as the sector sees a downturn.

Next, Dan Ives, Wedbush Securities, joins 'Closing Bell' to discuss the rough week for shares of Nvidia, the recent funding round from OpenAI and much more.

Jason Lemire on LinkedIn shows why Nvidia's real liabilities are more than twice what is shown on the balance sheet (see his post here).

Third, Warren Pies, 3Fourteen Ventures, joins 'Closing Bell Overtime' to talk why he is bearish on the markets due to the impact of AI on labor.

Fourth, Tom Lee explains why February felt worse than it was, why Nvidia’s valuation stands out, and why March could be a turnaround month.

Lastly, legendary macro investor Stan Druckenmiller joins Hard Lessons for a conversation with Iliana Bouzali, Global Head of Derivatives Distribution and Structuring at Morgan Stanley. 

Druckenmiller reflects on his early career and how he learned to act decisively and change course quickly when the facts on the ground shift. Hear how he would construct a portfolio if he had to start over today, why contrarianism is overrated, and which stock he regrets selling too early. 

Amazing interview, Stan is the man!! 

Too many U.S. employers are breaking the social contract by paying unfairly and inefficiently low wages. These low wages are one reason why even people who work regularly throughout the year can qualify for income assistance programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP).

Further, the Republican-led One Big Beautiful Bill (OBBB) that passed last year will sharply cut Medicaid and SNAP over the next decade by well over $1 trillion combined.

The combination of these trends—low-road employers paying insufficient wages and big upcoming cuts to Medicaid and SNAP—has led to a flurry of policy proposals at the state level to address them. One proposal—employer assessment fees (EAFs)—appears at first glance to address both problems by imposing a tax on firms that employ workers who receive Medicaid or SNAP, with the tax often calculated as the number of workers receiving these benefits multiplied by the average cost of those benefits. But EAFs are not the optimal solution to either problem and might cause undesirable collateral damage.

Here’s why:

• Medicaid and SNAP do not make it easier for employers to offer lower wages. In fact, they likely raise the wages needed to attract workers—and that’s a good thing.
  • This is not universal across all safety net and income support programs. Some of these, like the Earned Income Tax Credit (EITC), do see some of their benefits likely bypass workers and captured by low-wage employers.
• If you make Medicaid-receiving workers more expensive to employ, then employers will try to employ fewer of them and/or lower their market wages. And if the tax is proportional to the average cost of benefits like Medicaid, this incentive is large.
• Employer assessments fees are generally a large tax imposed on a small base. But revenue is maximized when tax bases are broad.
• The targets of EAFs can be more effectively reached with other policies.
  • Raising minimum wages and passing legislation to strengthen workers’ rights to unionize and bargain collectively are alternative policies for forcing employers to pay more.
  • Broad-based taxes are alternative polices for raising revenue.
    • Higher corporate income taxes or employer-side payroll taxes would be more progressive alternatives for taxing employers.
    • Another alternative would be to penalize firms that don’t offer employer-sponsored health insurance (ESI) to workers. This is not a huge base, but it is by definition wider than those who receive Medicaid (which is just a subset of all workers not receiving ESI through the firm.)

Below, we expand on these points.

Medicaid and SNAP do not make it easier for employers to offer lower wages

A concern is often expressed that Medicaid and SNAP “subsidize” low-wage employers by making it easier for them to offer lower wages. Intuitively, thinking that Medicaid and SNAP subsidize low-wage employers actually gives these employers far too much credit for caring about the living standards of their workers. Higher pay is not given out of the goodness of employers’ hearts—it happens when policy or market conditions change. Medicaid and SNAP do not change labor market conditions in any way that lowers workers’ pay, and when these programs are cut in coming years, low-wage employers are not going to think “we need to raise our wages to help these employees who are seeing cuts to other income sources.” They will instead raise wages only if policy mandates they do or if market conditions change.

In reality, Medicaid and SNAP actually boost lower-wage workers’ meager leverage to demand higher pay by making periods of non-work less miserable. This slightly improved fallback position for low-wage workers keeps them from being forced as quickly by material deprivation into accepting any possible wage offer from employers. Policy changes that reduce how many workers receive Medicaid or SNAP will put further downward pressure on wages. We should support policies that expand the number of workers who have their wages supplemented by safety net programs, not policies that penalize and stigmatize using benefits.

This wage-boosting effect is not universal among all public income support programs. The Earned Income Tax Credit (EITC), for example, pays more as workers supply more hours to the paid labor market. This boost to labor supply puts some downward pressure on market wages and can lead to some of the EITC benefits bypassing workers and being captured by employers (unless it is complemented by strong minimum wages.)

Making workers who receive safety net benefits more expensive will reduce demand for them

If you make workers who receive safety net benefits more expensive for employers to keep on payroll, then you increase the incentive for these employers to hire fewer of them or offer them lower wages.

Supporters of EAFs could argue this logic could be employed against any effort that made workers more expensive, like minimum wages. But minimum wages apply to all workers, and employers by definition cannot lower wages to absorb the higher costs minimum wages impose. Fully substituting away from workers whose pay has been lifted by minimum wages and toward other inputs essentially means employers would have to make costly investments in plant, capital, equipment, and processes.

Conversely, only a small fraction of workers receives safety net benefits. Absent binding minimum wages, employers can lower their market-based pay to recoup the EAFs (at least until they run into the relevant minimum wage in the labor market.) Trying to substitute away from workers who receive safety net benefits toward workers who are less likely to receive these benefits is more doable for employers than substituting away from all lower-wage labor.

These employer efforts to figure out who on their payroll is likely to trigger an EAF could lead to collateral damage. Workers from groups that are more likely to receive safety net benefits might be discriminated against across-the-board, regardless of whether or not they are actually enrolled in Medicaid or SNAP. Basically, EAFs mean that populations who are more likely to use benefits—like low-income single moms—would face even greater barriers in the labor market. Workers of color are also overrepresented among the families who use SNAP and Medicaid.

Further, the direct benefits of broad-based minimum wages to workers are large—all low-wage workers get a raise if their pay was lower than the new minimum. The direct benefits to any worker from an EAF is nonexistent—their pay does not rise, and they are not more likely to receive employer benefits.

The indirect benefits of EAFs are simply the revenue they raise, and if this revenue can be raised in less costly ways, then EAFs are not optimal.

EAFs are a large tax on a small base

Workers who receive Medicaid benefits constitute roughly 10% of the overall workforce (and their share of total hours is significantly less than this). This is a relatively small base for a tax. But the size of proposed EAFs is often quite large, sometimes as large as the average Medicaid benefit. This benefit can reach more than $9,000 annually in many states. For a full-time, year-round worker making $15 an hour, this constitutes a tax on employers equivalent to 30% of that worker’s entire earnings.

Large taxes on small bases often lead to behavioral responses that erode the revenue gained from the tax. The large value of the tax incentivizes this avoidance behavior, and the small base allows substitution away from workers who trigger the tax. This means that EAFs would raise—at best—a highly uncertain amount of revenue and could well end up raising small amounts.

Sometimes, behavioral responses to taxes that reduce the revenue they raise are socially useful. For example, when cigarette taxes lead to reduced smoking or even when workers facing higher taxes are able to voluntarily substitute more leisure for work. But the behavioral response to EAFs that lowers the revenue gained from them also directly inflicts harm on low-wage workers.

There are better alternatives for the policy goals of EAFs

The recent pushes to use EAFs come from very good impulses: the desire to force employers to pay more and stop defecting on the social contract, and the desire to raise revenue so that states can buffer their residents from the terrible coming effects of the OBBB.

But there are better alternatives to achieve these goals. To raise wages, higher minimum wages are an obvious first step. A second step is policy changes that better enable willing workers to form unions and bargain collectively, even in the face of steep employer resistance. Policymaker inaction has largely destroyed the fundamental right of association in much of the U.S. labor market. Reversing this would, in the long run, solve many of the problems of employer behavior that EAFs are trying to target.

There are also better sources to raise reliable revenue to buffer residents from the OBBB’s steep cuts. If the desired target for these revenue increases is employers, higher corporate income taxes or higher employer-side payroll taxes (for all workers) could be used. Another revenue source specifically targeted at low-road employers could be increasing penalties for firms based on the number of their employees who are not covered by employer-sponsored health insurance through the workplace. This is not a huge tax base, but it is by definition larger than just employers with workers receiving Medicaid, as it would also include workers with no coverage at all. Further, this tax would incentivize the provision of ESI to more workers, a good thing in itself.

Most people understand a basic truth: you get what you pay for. Skip maintenance on your roof, and you shouldn’t be surprised when leaks appear.

The same is true of government. If we want a high-functioning public sector—and we should—there is no shortcut. It requires sustained investment in the people and capacity that make government work. Starve it of resources, and its performance will inevitably suffer.

In a recent New York Times essay, academics Nicholas Bagley and Robert Gordon argue otherwise. In their telling, government underperforms because public-sector unions have too much power, driving up costs and resisting efficiencies. Their solution is simple: rein in unions and invest less—largely by cutting pay for public-sector workers. It’s a tidy story that promises an easy fix.

It is also economically incoherent.

The central constraint on public-sector performance is not the power of unions—it is chronic underinvestment. For decades, policymakers have allowed public-sector pay and prestige to fall behind comparable private-sector jobs and have outsourced key functions that should have been performed by skilled civil servants, not profit-maximizing private contractors that are the real source of excess costs for state and local governments. The predictable results have been staffing shortages, uneven service quality, and degraded state capacity—not because we are paying too much, but because we have been trying to get government on the cheap.

Start with the most basic implicit claim Bagley and Gordon return to again and again: that public-sector unions have extracted excessive compensation and resisted efficiencies at every turn. If that were true, we would expect to see the total compensation of public-sector workers rising as a share of the overall economy. In fact, the opposite has happened—the combined compensation of public employees has shrunk noticeably as a share of national income for the last quarter century.

To be sure, policymakers should always aim to deliver value for taxpayers. And—just as in the private sector—there are surely instances where some public employee’s pay is out of line or workers resist useful improvements. But if overpayment for services delivered inefficiently was a general feature of the public sector, their aggregate compensation wouldn’t be shrinking sharply over time.

Bagley and Gordon support their claims with a shotgun blast of anecdotes about public-sector unions able to muscle excess pay out of colluding Democratic politicians that are almost laughably context-free. L.A. Mayor Karen Bass gave larger-than-normal raises to public-sector employees in 2024? I’d hope so—prices had risen 23% in the previous five years (this inflation had made some news) and private-sector pay for non-supervisory employees was up 28% over that time. The suggestion by Bagley and Gordon that these raises were untoward only makes sense if you actively want the desirability of public employment to crater relative to the rest of the economy.

Bagley and Gordon also note darkly that “more than half” of local government expenditures are paid to employees. So what? Local government spending is not like federal government spending where the overwhelming majority of it is simple transfer payments—sending checks to people (Social Security) and medical providers (Medicare and Medicaid). Local governments must directly deliver public goods and services, like public education. That’s going to be done by people who need to be paid. The private sector, too, devotes the majority of its spending to labor (in the corporate sector, labor’s share is well over 70%.)

Even the data they cite for this irrelevant point show that compensation—including the benefits that Bagley and Gordon decry—in state and local jobs is lower than for similar workers in the private sector. That gap matters. Public-sector employers must compete in the same labor markets as everyone else, and low relative pay for skilled workers in the public sector compromises the ability of public-sector employers to attract and retain highly effective workers.

This ignorance of how labor markets in the private and public sectors interact is the root of many of Bagley and Gordon’s economic misunderstandings.

Consider their discussion of education spending, where they note that California spends more per pupil than Mississippi. California does spend more per pupil in nominal dollars, but prices in California are far higher than in Mississippi. Even more importantly, private-sector salaries for college-educated professionals in California are much higher than in Mississippi—and those are the jobs that set the outside options that talented college graduates weigh when deciding whether to enter and remain in teaching. Put another way, it is competition from the private sector that determines how high pay must be to attract and retain high-quality teachers. Education researchers know this, and that’s why the generally accepted way to assess the sufficiency of education spending is not nominal dollars spent per pupil, but per pupil spending scaled to per capita GDP in a state. In forthcoming work we show that on this measure, California ranks 36th in the nation—lower than Mississippi.

This also shows why the Bagley and Gordon claim that “…blue states and cities often also pay state and local government workers more than similar jobs pay in red jurisdictions, even after adjusting for the cost of living” misses the point so spectacularly. State and local governments are embedded in their local economies and public-sector pay has to rise in line with private-sector pay in the economy around them, or the quality and quantity of available public employees will suffer.

The big problem over recent decades is that public-sector pay has not kept pace with the surrounding economy, which has made it harder to recruit and retain qualified workers. Teacher shortages, for instance, stem directly from the huge gap that has emerged in recent decades between what public school teachers earn and what comparable private sector workers earn, even in the highest-spending states. How would making these jobs lower-paying and lower-prestige add excellent new teachers and improve educational outcomes?

Another common complaint about the public sector is that it slows infrastructure projects. The public is often invited to imagine huge teams of paper-pushing bureaucrats gleefully stamping “no” on planning documents. But the clearest finding in empirical research about the drivers of higher-cost infrastructure is that costs have risen fastest where states reduced the number of transportation department employees. Fewer public-sector workers means that more of the planning work has been outsourced to more expensive private consultants.

Bagley and Gordon claim that when policymakers bargain with public-sector unions, there is no constraint on their incentives to grant union demands in exchange for electoral support. In reality, there is a crushing countervailing constraint—the overwhelming perception that voters are rabidly anti-tax. This results in a deep reluctance by policymakers to call for the level of revenue needed for public sector excellence. It is a far bigger structural problem today than any supposed excess power of public-sector unions.

Public-sector workers don’t just bear the brunt of underinvestment, they are also one of the few consistent voices arguing for robust financing of state and local governments, bargaining directly for the public good. They advocate for libraries to remain open in rural communities so that everybody has at least some access to the internet, for higher levels of K–12 education spending, and for proper training for EMTs and other first responders to ensure public safety.

Despite these efforts, public sector financing has been throttled in recent decades, and the results have been a predictable degradation of services. Even worse is coming, as the Republican tax and spending megabill will impose crushing cuts to safety net programs that states administer and jointly fund.

For decades we have been relying on the admirable intrinsic motivation of public employees to shield us from some of the damage of underinvestment—nurses, first-responders, and teachers going above and beyond the strict demands of their jobs to provide services they feel called to perform. But we’ve already asked too much while paying too little. If we want a truly excellent public sector—and we should—we need to pay for it.

Sophie Baker of Pensions & Investments reports liquidity focus pays off for Ontario Teachers’ as dual CIOs mark two-year milestone:

It’s been two years since the Ontario Teachers’ Pension Plan restructured its leadership team, appointing two people to oversee investments — and despite some major changes and challenges in global markets, the so-called dual CIOs haven’t made any knee-jerk reactions. 

Rather, the focus for the two has largely been creating liquidity in the C$269.6 billion ($197 billion as of June 30) portfolio. 

"We have been quite proactive in terms of generating liquidity on the private asset side, and seen some good success there, particularly in the market," Stephen McLennan CIO-asset allocation, said in an interview. "We're in position now where we would like to deploy into attractive opportunities and continually assess what the right balance is between passive and active to generate active returns." 

"We also want to spend a lot of time focusing on the more technical definition of liquidity, how we manage the balance sheet, what we need for margin calls and making sure we have the flexibility in the portfolio across the markets," he said. 

McLennan and Gillian Brown, CIO-public and private investments were named CIOs in January 2024 by CEO Jo Taylor. Their appointments split the role previously held by Ziad Hindo (now senior advisor at Bridgewater Associates), separating the responsibilities of the position, and Taylor has dubbed them dual CIOs, each with distinct lanes of responsibility, they said. Among the so-called Maple 8 of Canada's largest public pension funds, OTPP is the only with this structure.

The thinking behind splitting the role was to acknowledge a changing world with more geopolitical conflict, greater focus on inflation and central banks, disjointed activity in markets, and disruption to business models, they said.

Taylor looked into how to "lean into value creation, thinking strategically about those businesses and how we go forward," Brown said in the same interview. "It was existential, almost a bandwith questions to involve CIO operating model."

Brown -- previously head of capital markets, who joined in 1995 -- oversees the public and private investment functions, covering equities, infrastructure and natural resources, venture growth, real estate and capital markets investment departments. 

McLennan oversees the overall asset allocation mix, with an eye on total fund performance and management portfolio risk. He's also responsible for the liquidity management, investment allocations and portfolio optimization. McClellan most recently oversaw total fund management comprising the portfolio construction, treasury funding and global trading capabilities, and joined the pension fund in 2003.

Between them, they're running a 475- person investment team. They overlap in a few areas. Two such examples are Europe, Middle East and Africa coverage and Asia Pacific. While both regional teams report to McClellan, they are more active in nature, so in line with Brown's responsibilities, they said. Ass of December 31 2024, 70% of total investments were EMEA and 8% in APAC.

"It's nice for me having a trusted partner," Brown said. Added McLennan: "It's good to have somebody you can trust also deals off challenging -- as well as positive -- circumstances." 

Challenging period since appointments as dual CIOs

Although the executives haven't made any "knee-jerk" moves in the portfolio in response to challenging global markets and powers, that's not to say they haven't had a lot to think about. 

For McLennan and Brown the US administration that came into power in January 2025 has been top of mind with market movements as President Donald Trump unveiled a raft of tariffs, an example of key consideration. However, the portfolio has been steady in light of that volatility, they said. One-third of the gross investments were in the US as of December 31 2024,

"We need to be on top of that since it has impacted global markets, which impacts all the portfolios. McLennan said. "Areas we have been spending some time on equity markets-- public and private fixed income in terms of both interest rates in the US and globally; currencies and commodities we are trying to digest and think through what the new administration means, not only this year, but for the years to come." 

The CIOs have also been cognizant of the need for diversification and when to start looking beyond the US in terms of equity performance that's been dominated by technology stocks. 

"Many are talking including ourselves, about diversification? Are we getting full diversification? Given the equity index is driven by a few names, it's a trend that has been beneficial for all investors, particularly non US investors. But is that going to continue forever?" McClellan said. "It doesn't mean that it's going to end, but at some point, there are valuations and other things we should be cognizant of." 

The fund achieved a 2.1% net return on investments for the six months ended June 30 with the total fund returns driven by public assets. Its asset mix of June 30 was 37% equity, including public and private equity and venture growth. 24% fixed income, 20% inflation, sensitive assets, commodities, natural resources, inflation edge. 24% real assets, real estate and infrastructure, 30% credit and 10% absolute return strategies, the asset mix includes 28% in funding and other assets such as overlays, the five-year and 10-year annualized net returns were 7.5% and 6.9 % respectively. 

Evolving private markets thinking and approaches

OTPP has been looking at where to be a direct investor and to have a more governance and control over private equity holdings, and when to partner with others. The fund's private equity allocation was 21% as of June 30.

"My view is, it doesn't make sense to have really dogmatic approach, and it's more about understanding what we are good at." Brown said. "The partnership question is interesting. Some investors use it to think 'fund- plus-partner'. We want to be humble about where we need more expertise, such as in sectors that require really specialized knowledge. Therefore we pick the right partners to work with on those assets." 

OTPP has always had assets that it co-owns without necessarily having a fund relationship, and has also always "had a lot of partners throughout the portfolio; so it's more about making sure we unlock the right ones to find the right tool for the situation," she added. 

Within its venture growth portfolio, which had C$10.4 billion in net assets as of December 31 2024, 42% was direct investments in North America-based assets, 21% in direct APAC investments, 13% in direct EMEA investments, and the remaining 24% was in funds. 

The fund paused private investment activities in China in early 2023 and more recently, made the difficult decision to close its Hong Kong office. The majority of the staff relocated to Singapore and Asia-Pacific region as a whole remains important. Brown said, with private equity, infrastructure and venture growth teams active in the region. 

At the same time, Bloomberg reported that the Hong Kong office was closed as OTPP optimized its footprint in the region, having added Singapore, Mumbai offices. The team in Hong Kong primarily focused on outward markets -- including Australia, Japan, South Korea -- and the spokesperson said activities could be effectively and efficiently served out of Singapore.

Executives have also been talking about where they see growth opportunities. "I think India has become more of a focus for growth in that context, as a market that is still maturing with good depth of capital markets." Brown added. 

And while the major portfolio changes haven't been in the cards for the dual CIOs, they have made a key addition to their private markets capabilities amid ever-changing investment pacing and exit environments and the increasing importance of accountability and monitoring. In that context, McLennan and Brown said 

In January 2025, OTPP created its portfolio solutions group, a team of 37 people, monitoring and enhancing performance, improving best practice and providing more centralized value creation oversight in a single cross-asset function. About 80% of OTPP's portfolio is actively managed and private markets accounts for a large proportion of that total. 

The team is staffed with existing OTP members, led by Executive Managing Director Kevin Kerr, and works with deal teams on underwriting at point of entry, assists with variations and perspectives, refreshing value creation plans ahead of exits, helps deliver on key performance indicators and gets involved in an asset when it's not performing versus expectation. 

"They have been identifying the important areas where we want deeper subject management expertise, for example, talent management, new relationships, capital market access for technology and data opportunities," McClellan said. "In a world where realizations globally have slowed down, (and) we're owning assets for a longer period, we're making sure the holding period gets more attention, not less." 

The team also brings an impartial view on assets. "At Teachers', we believe challenge is a healthy thing," Brown said. "People can fall in love with them, with assets that they hold, so it's good to have external person say, is that really a good process, a good holding?" 

This is a really great in-depth article which I wanted to share with my readers.

It not only provides a glimpse into the dual-CIO structure at OTPP, how it works, their respective functions, but also how they collaborate with each other and across asset classes, leveraging off external partners and making sure internal teams stick to their value creation plan.

Gillian Brown has been around OTPP for a very long time (since 1995), has worked with some great CIOs (Bob Bertram, Neil Petroff and Ziad Hindo) and she knows her stuff across public and private markets.

Stephen McLennan has also been there since 2003 and he was in charge of total fund management prior to becoming CIO, Asset Allocation. His group has to think more macro and how to extract the most out of the total fund to deliver on their objectives.

The  dual CIO structure has been tried before -- at AIMCo where it unfortunately failed--  but in this case, I really think Gillian and Stephen complement each other well and they're making it work.

Jo Taylor isn't an easy boss, he has high expectations from them and other senior executives and so it all has to work or else he"d be the first to pull the plug.

And the Portfolio Solutions team which Kevin Kerr manages is critically important in this process, they really need to realize on value creation, see when dispositions make sense, and work on assets that need to be worked on. 

One thing Teachers' does well is leverage off its partners, be it in private equity, venture, hedge funds, infrastructure, real estate to really get a good sense of what is going on in each asset class.  

Alright, I'm going to wrap it up there, make sure you read the latest news at OTPP here. 

I will soon be covering OTPP's 2025 results and look forward to catching up with Gillian, Stephen and Jo.

Below, the CNBC Investment Committee debate the software sector as Stephanie Link and Malcolm Ethridge makes some moves in the space. 

Also, Dan Niles, founder of Niles Investment Management, offers a measured view of the stock sell-off driven by concerns over AI disruption, saying companies perceived as linked to OpenAI were caught up in an unsustainable wave of speculative buying. 

I don't know, as I stated last Monday, it's time to nibble on software stocks, I think AI disruption fears are running amok. 

Bondi Sands Self Tanning Instructions: A Comprehensive Guide

Achieve a sun-kissed glow with Bondi Sands! This guide details preparation, application, and aftercare, ensuring a flawless, natural-looking tan every time, starting today.

Bondi Sands has rapidly become a global leader in self-tanning, celebrated for delivering a beautiful, natural-looking tan inspired by the iconic Australian beaches. Their formulations are designed to cater to all skin tones and experience levels, from beginners seeking a subtle glow to tanning enthusiasts desiring a deeper bronze. The brand’s commitment to quality and ease of use has made it a favorite among beauty influencers and everyday users alike.

Unlike traditional tanning methods, Bondi Sands self-tanners offer a safe and convenient alternative to sun exposure, minimizing the risk of harmful UV damage. The range includes foams, lotions, and gradual tanning milks, each formulated with nourishing ingredients to hydrate and condition the skin while developing a stunning tan. Preparing your skin correctly and following the application instructions are key to achieving optimal results and avoiding common tanning mishaps.

This comprehensive guide will walk you through every step of the Bondi Sands tanning process, ensuring you achieve a flawless, salon-quality tan in the comfort of your own home.

Understanding Bondi Sands Product Range

Bondi Sands offers a diverse range of self-tanning products designed to suit various preferences and skin types. Their core collection features Aerated Self Tanning Foam, known for its lightweight texture and quick-drying formula, providing a streak-free application and a natural-looking tan. Alongside the foam, Bondi Sands provides classic Lotions, offering deeper color development and intense hydration – ideal for drier skin.

For those seeking a more subtle and buildable tan, the Gradual Tanning Milk is a perfect choice. This product gradually develops color with each application, allowing you to customize your desired level of bronze. The range also includes specialized products like exfoliating mitts and application mitts, designed to enhance the tanning experience and ensure optimal results.

Understanding the differences between these formulations is crucial for selecting the product that best aligns with your tanning goals and skin needs, ultimately leading to a flawless and satisfying self-tan.

Bondi Sands Aerated Self Tanning Foam

Bondi Sands Aerated Self Tanning Foam is a flagship product, celebrated for its incredibly lightweight and airy texture. This innovative formula allows for effortless application, spreading smoothly and evenly across the skin without feeling sticky or heavy. The aerated consistency ensures rapid absorption, minimizing transfer onto clothing and bedding.

The foam’s unique formulation contains nourishing ingredients that hydrate the skin while developing a natural-looking tan. A key benefit is the built-in guide color, which provides instant visual feedback, ensuring complete coverage and preventing streaks. It’s particularly beginner-friendly due to this feature, making self-tanning less intimidating.

Available in various shades, the Aerated Foam caters to diverse skin tones, allowing everyone to achieve their desired level of bronze. It’s a popular choice for those seeking a quick-drying, streak-free, and naturally radiant tan.

Bondi Sands Lotion vs. Foam

Choosing between Bondi Sands Lotion and Foam depends on your preference and skin type. The lotion offers a more gradual tan development, ideal for those wanting a subtle glow or maintaining existing color. It’s deeply hydrating, making it suitable for dry skin, and allows for precise application, particularly on areas prone to dryness like elbows and knees.

Conversely, the foam provides a faster, more intense tan. Its lightweight texture is perfect for normal to oily skin, minimizing the feeling of stickiness. The foam’s quick-drying formula reduces transfer risk, making it convenient for busy schedules. The built-in guide color aids in even application, preventing streaks.

Ultimately, foam is often recommended for beginners due to its ease of use and visible results, while lotion suits those desiring a more controlled, moisturizing tanning experience.

Bondi Sands Gradual Tanning Milk

Bondi Sands Gradual Tanning Milk is designed for daily use, building a subtle, natural-looking tan over time. Unlike instant foams or lotions, it provides a customizable glow, perfect for those new to self-tanning or wanting to maintain an existing tan. This milk is incredibly hydrating, enriched with aloe vera and vitamin E, leaving skin feeling soft and nourished.

Application is simple: apply evenly to clean, dry skin, just like a regular moisturizer. Reapply daily for a deeper tan, adjusting the amount based on your desired intensity. It’s a fantastic option for all skin types, especially those with sensitive skin, as it minimizes the risk of streaks and unevenness.

Remember to exfoliate regularly for optimal results and to maintain an even fade. This milk is your secret weapon for a year-round, healthy-looking glow!

Pre-Tanning Preparation: Essential Steps

Proper preparation is key to achieving a flawless Bondi Sands tan. Begin with thorough exfoliation to remove dead skin cells, creating a smooth canvas for even application. The Bondi Sands Exfoliation Mitt is ideal for this, gently buffing away impurities and promoting a longer-lasting tan. Don’t skip this step – it prevents patchiness and ensures optimal color development!

Consider your hair removal routine. Shaving or waxing should be done at least 24 hours before application to avoid irritation and uneven tan absorption in freshly sensitized skin. Immediately before applying your Bondi Sands tanner, avoid applying regular moisturizers, body oils, or lotions. These create a barrier, hindering the development of the tan.

A clean, dry, and hydrated (but not moisturized) base is the perfect starting point for your self-tanning journey.

Exfoliation: Using the Bondi Sands Exfoliation Mitt

The Bondi Sands Exfoliation Mitt is your first step to a streak-free, long-lasting tan. Unlike harsh scrubs, the mitt gently yet effectively removes dead skin cells, revealing a smooth surface for optimal product absorption. Wet the mitt thoroughly in the shower and use circular motions, working your way from your feet upwards.

Pay extra attention to areas prone to dryness, such as elbows, knees, and ankles. Don’t rush this process; spend a good 2-3 minutes exfoliating your entire body. This ensures even tan development and prevents patchiness. Rinse off any exfoliated skin and pat your skin dry with a towel.

Remember, exfoliation isn’t just for pre-tan prep; maintaining regular exfoliation post-tan will help your tan fade evenly, extending its life!

Shaving or Waxing Considerations

Timing is crucial when it comes to hair removal before applying Bondi Sands self-tanner. To achieve the best results and avoid irritation, complete any shaving or waxing at least 24 hours before your tanning session. This allows your skin to calm down and any open pores to close.

Freshly shaved or waxed skin is more porous and can absorb more tanner, potentially leading to a darker, uneven result, or even temporary spotting. Waiting a full day minimizes this risk. If you must shave on the day of application, do so well in advance and rinse thoroughly, ensuring no razor burn or irritation remains.

Prioritizing skin health ensures a flawless, natural-looking tan. Remember, patience is key for a beautiful, sun-kissed glow!

Moisturizing – What to Avoid Before Application

Hydrated skin is important, but avoid applying any moisturizers, lotions, or oils for at least 24 hours before your Bondi Sands self-tan application. These products create a barrier on the skin, preventing the tanning agents from properly absorbing and developing a natural-looking color.

This barrier can lead to streaking, unevenness, and a tan that simply doesn’t last. While daily moisturizing is essential for healthy skin, it’s best to skip it immediately before tanning. If you have naturally dry skin, a light exfoliation (using the Bondi Sands Exfoliation Mitt) is preferable to moisturizing.

Focus on prepping your skin with exfoliation to remove dead skin cells, creating a smooth canvas for the tan. Remember, a clean, dry, and oil-free base is vital for optimal results!

Application Technique: Achieving a Flawless Tan

Mastering the application is key to a streak-free, natural-looking Bondi Sands tan. Begin with the Bondi Sands Application Mitt – it’s your best friend! Pump a moderate amount of foam directly onto the mitt; start with less, you can always add more.

Using long, sweeping motions, blend the foam onto your skin, working in circular movements. Avoid rubbing vigorously. Ensure even coverage, overlapping slightly as you go. Work section by section – legs, arms, torso – to maintain control and avoid missing spots.

Remember to apply in a well-lit area to visually confirm complete coverage. The guide color will assist in seeing where you’ve applied product. Don’t stress about perfection; the mitt helps distribute the tan evenly, minimizing streaks and maximizing a beautiful, bronzed result.

Using the Bondi Sands Application Mitt

The Bondi Sands Application Mitt is essential for a flawless, streak-free tan. This velvety mitt acts as a barrier, protecting your palms from staining and ensuring even product distribution. Before each use, ensure the mitt is clean and dry for optimal performance.

To use, simply slide your hand inside the mitt. Pump a small amount of Bondi Sands self-tanner directly onto the mitt – starting with less is always best! The mitt’s texture allows for controlled application, preventing over-saturation and minimizing the risk of dark patches.

Employ long, sweeping motions, blending the product into your skin. The mitt’s design helps buff the tan, creating a natural-looking finish. Remember to wash the mitt after each use with mild soap and water, allowing it to air dry completely before storing.

Foam Application: Amount and Motion

Begin with a small amount of Bondi Sands foam on your application mitt – approximately a golf ball size for each limb. Remember, you can always add more, but removing excess is difficult! Utilize long, sweeping motions, working in circular patterns to blend the foam evenly across your skin.

Avoid applying too much pressure, as this can lead to streaking. The guide color will help you visualize coverage, ensuring no areas are missed. Work quickly and systematically, section by section, to maintain an even application.

Focus on blending the foam thoroughly into the skin, paying attention to areas prone to dryness, like elbows and knees. Consistent, fluid motions are key to achieving a natural, sun-kissed glow. Don’t forget to blend down towards the wrists and ankles to avoid harsh lines!

Application to Specific Areas (Elbows, Knees, Hands, Feet)

These areas require a lighter touch! For elbows and knees, apply a very small amount of foam to your mitt and blend it out thoroughly, as these areas tend to absorb more product. Use even less product on your hands and feet – a tiny amount is sufficient;

When applying to hands, blend the foam onto the back of your hands first, then gently blend onto the palms, ensuring you get between your fingers. For feet, apply to the tops and sides, avoiding the soles.

Immediately after application to hands and feet, use a damp wipe or a clean, damp mitt to remove any excess product from your palms, knuckles, ankles, and toes to prevent overly dark areas. Remember, less is more with these tricky spots!

Development Time & Rinse Off

Allow the Bondi Sands self-tan to develop fully for optimal results. The recommended development time is between 2 to 8 hours, depending on your desired depth of tan – longer for darker results. Avoid applying any clothing during this period to prevent staining.

Once the development time is complete, it’s time to rinse! Use lukewarm water and gently massage your skin in circular motions to evenly remove the guide color. Do not use soap, shower gel, or exfoliants during the initial rinse, as this can hinder the tan’s development.

Continue rinsing until the water runs clear. Pat your skin dry with a soft towel – avoid rubbing. Your tan will continue to develop over the next 24-48 hours, deepening into a beautiful, natural-looking glow.

Recommended Development Time

The ideal Bondi Sands development time hinges on your desired tan intensity. For a light golden glow, a development period of 2-3 hours is sufficient. If you’re aiming for a medium tan, allow the product to work its magic for 4-6 hours. For those desiring a deep, bronzed look, leave it on for the full 8 hours – or even overnight!

Remember, the longer you leave the tan on, the darker it will become. It’s always best to start with a shorter development time and build up the color gradually in subsequent applications; Avoid any activities that might cause excessive sweating during development, as this can affect the evenness of the tan.

Prior to rinsing, ensure you’ve allowed the full recommended time for optimal color development and a flawless finish.

Rinsing Technique for Optimal Results

Rinsing is crucial for revealing your Bondi Sands glow! Begin with lukewarm water – avoid hot water, as it can strip the tan. Gently rinse off the guide color, using circular motions and avoiding harsh scrubbing. Don’t use any soap, shower gel, or exfoliants during this initial rinse; water alone is best.

Continue rinsing until the water runs clear. Pat your skin dry with a soft towel, avoiding vigorous rubbing. Resist the urge to moisturize immediately after rinsing; allow your skin to fully dry for optimal color development. This allows the tan to fully oxidize and reach its deepest, truest shade.

Proper rinsing ensures an even, streak-free tan and maximizes longevity.

Post-Tan Care: Maintaining Your Glow

Extend the life of your Bondi Sands tan with proper aftercare! Hydration is key – moisturize daily with a lightweight, oil-free lotion. This replenishes skin’s moisture barrier and prevents the tan from fading unevenly. Avoid harsh soaps, body washes containing sulfates, and exfoliating scrubs, as these can accelerate tan removal.

When swimming, chlorine can quickly diminish your tan, so apply a waterproof sunscreen. Similarly, prolonged sun exposure without protection will fade your color. Pat your skin dry after showering or swimming, rather than rubbing.

Consistent moisturizing and gentle care will keep your Bondi Sands glow radiant for longer, ensuring you look and feel fabulous!

Moisturizing After Tanning

Replenish and protect your newly tanned skin with consistent moisturizing! After your Bondi Sands tan has fully developed and been rinsed, applying a hydrating lotion is crucial. Opt for a lightweight, oil-free formula to avoid stripping the tan or clogging pores. Focus on areas prone to dryness, like elbows, knees, and ankles.

Moisturizing doesn’t just prolong your tan; it also keeps your skin healthy and supple. Dry skin will cause the tan to fade unevenly and quickly. Apply lotion daily, ideally after showering, when your skin is most receptive.

Consider lotions specifically designed for tan maintenance, often containing ingredients to lock in color and provide extra hydration. A well-moisturized skin equals a longer-lasting, beautiful Bondi Sands glow!

Avoiding Harsh Soaps and Exfoliants

Protect your Bondi Sands tan by steering clear of harsh skincare products! Immediately after rinsing off your self-tanner, and for several days afterward, avoid soaps containing sulfates, alcohol, or strong fragrances. These ingredients can strip away the tan and leave your skin feeling dry and irritated.

Similarly, refrain from vigorous exfoliation. While exfoliation is essential pre-tan, it’s your tan’s enemy post-application. Aggressive scrubbing or using exfoliating tools will accelerate fading and create patchiness. Gentle cleansing is key.

Opt for mild, hydrating body washes and continue regular moisturizing to maintain your glow. Delay any further exfoliation for at least a few days, allowing the tan to fully develop and fade naturally. A little care extends your beautiful Bondi Sands results!

Troubleshooting Common Tanning Issues

Don’t panic if your Bondi Sands tan isn’t perfect! Streaking often occurs from uneven application or insufficient blending; re-apply a light layer to affected areas, blending thoroughly with a mitt. For an uneven tan, gentle exfoliation can help even out the color, followed by a re-application.

Orange tones usually result from leaving the tan on for too long or using too much product. Hydrate skin intensely and consider a gradual tan remover if the color is too intense. Remember, less is more!

Always patch test a small area first. If issues persist, consult Bondi Sands’ website for specific product advice. Proper preparation and aftercare significantly minimize these problems, ensuring a flawless, natural-looking tan.

Streaky Tan Solutions

Encountering streaks with your Bondi Sands tan? Don’t worry, it’s easily fixable! The most common cause is uneven application or inadequate blending during the initial process. To remedy this, gently re-apply a very light layer of Bondi Sands self-tanner specifically to the streaky areas.

Crucially, blend this second application meticulously with your Bondi Sands Application Mitt, using sweeping circular motions. Ensure you’re blending into the surrounding tanned skin, not just over the streaks. Avoid applying a thick layer, as this can worsen the problem.

Allow to develop for a shorter period than the original application, and rinse thoroughly. Prevention is key – always exfoliate and moisturize before application!

Uneven Tan Correction

Dealing with an uneven Bondi Sands tan can be frustrating, but it’s often easily corrected. The primary cause is typically inconsistent application, often due to drier areas absorbing more product. To address this, gentle exfoliation is your first step – focus on the darker areas to lightly reduce the tan intensity.

Next, apply a very light layer of Bondi Sands self-tanner to the lighter areas, blending seamlessly with the existing tan using your Application Mitt. Remember to use circular motions and avoid harsh lines. Allow a shorter development time than your initial application, monitoring the color closely.

Rinse thoroughly and moisturize. Consistent exfoliation and hydration between applications will help prevent future unevenness!

Dealing with Orange Tones

An orange tint after Bondi Sands tanning usually indicates over-application or insufficient exfoliation. The key to avoiding this is proper preparation and following the recommended development time. If you’ve already developed an orange hue, don’t panic! Immediate action can help.

Begin with a gentle, full-body exfoliation using the Bondi Sands Exfoliation Mitt, focusing on areas with the most intense color. This will help lift the excess DHA responsible for the orange tone. Follow this with a baking soda paste (mix baking soda with water) applied to the affected areas for a few minutes before rinsing thoroughly.

Moisturize deeply afterward. For future applications, use less product and ensure thorough exfoliation beforehand. Remember, a gradual tan is always preferable to a drastic one!

Bondi Sands Tanning FAQs

Q: How long does a Bondi Sands tan last? A: Typically, 5-7 days with proper aftercare, including regular moisturizing;

Q: Can I tan if I have sensitive skin? A: Yes, but perform a patch test 24 hours prior. Bondi Sands offers products formulated for sensitive skin.

Q: Will Bondi Sands stain my clothes? A: While the guide color washes off, wear loose, dark clothing during development.

Q: Can I apply Bondi Sands on my face? A: Yes, but use a lighter application and avoid the eye area. Bondi Sands also has specific facial tanning products.

Q: What if my tan is streaky? A: Exfoliate and reapply with a lighter hand, ensuring even coverage.

Q: Is Bondi Sands cruelty-free? A: Yes, Bondi Sands is proudly cruelty-free and vegan-friendly.

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Nicolas Van Praet of the Globe and Mail reports Caisse posts 9.3% return in 2025 on gains from stock holdings:

Caisse de dépôt et placement du Québec tallied an 9.3-per-cent return last year as gains from stock holdings offset a neutral performance by real estate investments in an environment marked by ongoing trade strife, global conflict and the expansion of artificial intelligence across society.

Net assets stood at $517-billion at the end of 2025, up from $473-billion the year before, the Montreal-based pension fund manager said in a statement Wednesday. The annualized return over five years was 6.5 per cent.

“It’s really a new world order out there,” Caisse Chief Executive Charles Emond said in an interview, noting the power of AI-related themes over stock markets among other major shifts taking place. Investment diversification remains the key to delivering stable returns as the uncertainty persists, he said.

“The main risk we’re dealing with – and I would have never thought I’d say that during my career – is the U.S.,” Mr. Emond said. U.S. exceptionalism is still there, but it has eroded lately and “the level of trust” has been put to the test, he said. “It’s actually paid off to be invested elsewhere.”

The U.S. remains the deepest, most liquid and most attractive market for investors and the Caisse is not exiting the country, Mr. Emond insisted. But it is being more prudent in the way it invests there.

The pension fund pared back U.S. stock holdings last year while boosting credit activity. It also sold some U.S. office buildings while hedging more than usual on its U.S. dollar exposure. Roughly 40 per cent of its total assets are invested across the border.

The pension fund’s gain on equity market investments was 17.7 per cent for the year, the third best over the past decade, as it added to positions in other markets such as Europe and South Korea. Its infrastructure portfolio generated a 9.2-per-cent showing, driven by energy, ports and highway investments, while fixed income returned 6.6 per cent.

On the other end of the spectrum, the Caisse’s real estate holdings remained under pressure, delivering a 0.2-per-cent return as the market recovers. Private equity, usually a strong motor for the pension fund, generated a 2.3-per-cent gain as profit growth slowed for its portfolio companies and valuation multiples dropped in the technology and health care sectors.

The mixed results, which closely matched the previous year’s 9.4-per-cent return, highlight the magnitude of the challenges for Mr. Emond, a former Bank of Nova Scotia executive who took over as Caisse CEO in early 2020.

His tenure, which was recently extended to 2029, has been fraught with turmoil from the COVID-19 pandemic, record inflation, and wars in Ukraine and the Middle East. Donald Trump’s reclaiming of the White House has presented a new test: The President’s unpredictability has repercussions for trade and on the decisions of central bankers and corporate leaders.

The Caisse, which is independently run at arm’s length from the Quebec government, has a dual mandate to manage deposits with a view to achieving optimal returns while contributing to Quebec’s economic development. It is omnipresent in the province, investing in companies such as Alimentation Couche-Tard Inc. and WSP Inc. and pushing into transit development with Montreal’s $8-billion Réseau express métropolitain light-rail system.

Quebec Premier François Legault said last November that the Caisse “needs to do even more” to back local projects and business in the face of Mr. Trump’s trade war against Canada, which has hurt aluminum makers and forestry companies in the province. “I think the situation is critical right now,” the Premier said at the time.

The Caisse now has assets in Quebec topping $100-billion, a target it set three years ago. It hasn’t set a new goal, vowing instead to be “more intentional” on the impact of future investments in strategic sectors such as natural resources, defence and energy, Caisse executive vice-president Kim Thomassin told reporters at a news conference.

Among its biggest domestic deals in the past 12 months, the Caisse bought Innergex Renewable Energy Inc. for about $2.8-billion and struck a $1.3-billion deal with Telus Corp. for a minority stake in a new cellphone tower spinout called Terrion. It also made a US$100-million equity investment in Champion Iron Ltd to support the miner’s acquisition of Norway’s Rana Gruber SA.

Earlier this month, the pension fund briefly suspended its deal-making with DP World Ltd. in the wake of revelations linking the chairman and chief executive of the logistics multinational to disgraced financier Jeffrey Epstein. It has since resumed working with its long-standing partner after the executive resigned. 

The only thing I will mention about this Epstein thing is the head of global ports operator DP World has left the company after mounting pressure over his links to convicted sex offender Jeffrey Epstein.

The Caisse briefly suspended its operations after discovering this and has since resumed them. Obviously they had no idea Sultan Ahmed bin Sulayem exchanged hundreds of emails with Epstein.

Anyway, today is a very big day because La Caisse posted its results and despite weakness in private equity and ongoing issues in real estate, they were solid powered by public equities, credit and infrastructure. Its Quebec portfolio also did well.

Now, this morning I virtually assisted the press conference from the comforts of my home and took a quick image of Charles Emond, Kim Thomassin and Vincent Delisle (at top of this post).

I must admit, that was the first time I virtually assisted this press conference and to my surprise, I thoroughly enjoyed it, thought Charles, Kim and Vincent did a great job and the slides which you will see below gave a perfect overview.

Typically I find these press conferences dreadfully boring and tiresome but this one was very well done, and for the most part, reporters asked decent questions and I told Charles, Kim and Vincent afterwards that they should post it publicly on their YouTube channel.

I'm not kidding, it was that good and if I was able to embed it, it would save me a lot of time explaining things.

One of the most important questions Charles tackled was why their underpeformance relative to benchmark over the last year (9.3% vs 10.9%) and whether it's worth investing in private markets.

Charles explained that they have a mandate from depositors to deliver returns taking risks into account and they have delivered strong gains over the long run by taking a diversified approach across public and private markets and this approach offers higher risk-adjusted returns. 

I'm paraphrasing but if I get the transcript in French, I will post it here and I thought that was extremely well answered. 

The only question I didn't like (it always irritates me) is how did La Caisse perform last year relative to its peers. Charles said their biggest client whose portfolio is closest to CPP Investments gained 9.8% last year which was better than CPP Investments' 7% return over last nice months and OMERS' 6% gain last year but we are comparing apples to oranges because the asset mixes aren't the same (CPP Investments and OMERS have more private market exposure).

There are so many factors that go into comparing returns across pension funds that I absolutely hate these questions and besides, they're all in great financial health, have way more assets than long-dated liabilities (and that's what ultimately counts, not outperforming each other). 

One year those that have more public market exposure will fare better, another those that have more private market exposure will fare better. Who cares? 

All of the Maple 8 funds underperformed Norway's sovereign wealth fund which gained 15.1% last year, it means absolutely nothing to me (all about asset mix!!).

Alright, let me get to this morning's press conference but before I do, some more articles in French:

•  La Caisse à la traîne pour une troisième année d’affilée
• La Caisse annonce un rendement de 9,3 % en 2025 
• Rendement de 9,3% pour la Caisse en 2025, sous la cible pour la troisième année consécutive 
• La performance de La Caisse pour 2025 a été en deçà des attentes 

Basically the French media is savage, La Caisse underperformed its benchmark for a third straight year, but overall performed well and beat OMERS (again, who cares?).

Morning Press Conference With Charles Emond, Kim Thomassin and Vincent Delisle

As mentioned above, I really liked this morning's press conference, so much so that I believe La Caisse should make it public and post it on YouTube as soon as possible (la transparence avant tout!).

Before I get to the slides, here is La Caisse's press release stating it posted a 9.3% return in 2025 and net assets of $517 billion:

• The depositor plans are in excellent financial health
• The base plan of the Québec Pension Plan, representing the pensions of more than six million Quebecers and the largest fund invested with La Caisse, earned a return of 9.8%
• The ambition of $100 billion invested in Québec achieved one year early

La Caisse today presented its financial results for the year ended December 31, 2025. The weighted average return on its 48 depositors’ funds was 9.3% for one year, below its benchmark portfolio’s 10.9% return. Over longer terms, performance is above the benchmark portfolio: over five years, the annualized return was 6.5%, with the benchmark portfolio at 6.2%; over ten years, it stood at 7.2%, against the benchmark portfolio’s 6.9%. As at December 31, 2025, La Caisse’s net assets totalled $517 billion.

In 2025, the environment was marked by geopolitical tensions and persistent tariff uncertainty. Nevertheless, the global economy proved resilient and stock markets once again posted a robust performance. Although central banks generally lowered their key rates, long-term bond yields moved in different directions, falling in the United States but rising in several other countries, including Canada.

“Last year, our overall portfolio posted a good return, with the right level of risk for our depositors. As public markets were particularly strong, they were the main driver of our annual performance. In an environment shaped by uncertainty and profound changes that are likely to persist, diversification remains essential, allowing each asset class to play its part across different market conditions,” said Charles Emond, President and Chief Executive Officer of La Caisse.

“Looking back at the past five years, markets have been volatile and difficult to follow, with pronounced differences between asset classes and sharp fluctuations from one year to the next. Having stayed the course with numerous transactions in key sectors around the world, the advancement of structuring projects in Québec, and the rollout of a new climate strategy even against strong headwinds, all while maintaining the excellent financial health of our depositor plans, are all reasons to be proud of the role and impact of this major institution for Québec,” he added.

Return highlights

As at December 31, 2025, La Caisse’s investment results totalled $43 billion for one year, $134 billion over five years and $245 billion over ten years.

Forty-eight depositors with different objectives

La Caisse manages the funds of 48 depositors—mainly for pension and insurance plans. The overall portfolio’s one-year, five-year and ten-year returns represent the weighted average of these funds. To meet their objectives, investment strategies are adapted to individual depositor risk tolerances and investment policies, which differ considerably.

For one year, returns for La Caisse’s nine largest depositors’ funds ranged from 8.6% to 10.4%. Over longer periods, the annualized returns varied between 4.6% and 7.8% over five years, and between 5.8% and 8.0% over ten years.

The largest fund invested with La Caisse, the base plan of the Québec Pension Plan, administered by Retraite Québec, posted a return of 9.8% for one year, 7.8% over five years and 8.0% over ten years. As at December 31, 2025, its net assets were $163 billion, including the additional plan.

Equities

Equity Markets: Beneficial geographic diversification

Stock markets experienced a year of rotation in 2025, with the U.S. market being perceived as more uncertain, and giving up ground to other stock markets, such as those in Europe, Canada and emerging countries. The latter benefited from good performances in a variety of sectors, including technology, as well as materials and finance. Sound geographic diversification, combined with the quality of execution by portfolio managers, enabled the Equity Markets portfolio to record a return of 17.7%, its third-best performance in ten years, and to outperform the index in the vast majority of mandates. The benchmark index stands at 18.2%. The difference over the period is mainly due to the more limited contribution of certain Québec stocks in the portfolio, as well as its low exposure to the gold segment, which grew sharply during the year.

Over five years, the annualized return was 12.4%, above the 12.1% return of the benchmark portfolio. Performance therefore outpaced the benchmark index despite growing concentration of gains in the main stock market indexes during the period. The portfolio benefited from the 2021 changes aimed to take advantage of technology stocks. The launch of systematic management strategies, which leverage data processing capabilities using augmented intelligence, has also had a significant positive impact.

Private Equity: Slower growth affects portfolio

In 2025, the Private Equity portfolio posted a 2.3% return. This was the result of slowing earnings growth for portfolio companies and lower multiples in the technology and health care sectors. Some investments, although performing well since the initial investment, experienced a setback and weighed on performance during the year, despite the good performance of companies in the industrials sector. The benchmark index, half of which is made up of public stocks, returned 12.6%, as public markets were much more robust than the private market.

Over five years, the portfolio has been one of the main drivers of overall performance, boosted by investments in the industrial, financial and technology sectors, delivering an annualized return of 11.6%. Over the period, the more moderate performance of a handful of stocks explains the difference with the portfolio’s performance relative to its index, which stood at 14.7%.

Fixed income

Credit activities are a strong vector of performance

The majority of the Fixed Income asset class is comprised of the Credit and Rates portfolios, with the latter serving as a source of liquidity for the overall portfolio. In 2025, the asset class generated a 6.6% return, above its benchmark index’s 4.6%. The Credit portfolio was a strong performance driver, with a return of 9.6%. It recorded its best ever performance against its index, which posted a 6.6% return, due to results obtained in the private segment, emerging market sovereign debt and the quality of execution by the teams.

Over five years, the asset class posted an annualized return of -0.2%, compared with a benchmark return of -1.1%. The good performance of the Credit portfolio over the period, driven by Capital Solutions and Corporate Credit activities, boosted the asset class, but failed to offset the impact from the strongest bond market correction in 50 years that occurred in 2022.

Real assets

Infrastructure: Consistent performance in diverse market environments

The portfolio has maintained its momentum of recent years, delivering a return of 9.2% in 2025. It benefited from an attractive current yield of 5.0% and the quality of portfolio assets. Energy, ports and highways were the largest contributors to performance. The benchmark index, made up entirely of public stocks, returned 13.4%. It was buoyed by the growth of companies in the electricity segment, which continues to be stimulated by the historic demand for artificial intelligence and weighs heavily in the index.

Over five years, the annualized return was 10.8%, outpacing the index’s 8.0% return. The portfolio continues to benefit from asset diversification, with the energy, transportation and telecommunications sectors leading the way, as well as from its strong current yield, across very different cycles over the period, marked in particular by higher inflation.

Real Estate: Progress on turnaround plan in an industry still under pressure

For one year, the portfolio posted a 0.2% return, compared with 1.8% for its benchmark index. In a gradually recovering market, direct portfolio assets in the logistics and residential sectors, as well as offices and shopping centres, posted a 4.4% return, a sign that rental incomes and property values are stabilizing. However, this return was offset by the high cost of financing. Lower performance of assets in China largely explains the difference with the index. It should be noted that the teams were particularly active in portfolio turnover, achieving a high transaction volume, totalling nearly $11 billion, or double the previous year’s figure.

Over five years, the portfolio’s annualized return was 1.2%, affected by its exposure to the office sector, which has been weakened by changes in working habits, but whose effects were mitigated by favourable performance in logistics. The benchmark index returned 1.4%, reflecting the challenges faced by the industry in recent years.

Global strategies that generate value

La Caisse’s teams also employ global strategies to optimize performance, including positioning on macro factors and foreign currency management:

• Macro tactical strategies contributed positively to overall portfolio performance in 2025, successfully navigating the volatility seen during the year, particularly in April with the unveiling of U.S. tariff policy, which prompted significant movement in global financial markets. These overlay activities, which are designed to improve the risk-return profile and enhance overall performance against the benchmark portfolio, have generated $1.2 billion in added value over one year.
• While the portfolio’s exposure to foreign currencies had an adverse impact on 2025’s overall performance due to the sharp depreciation of the U.S. dollar, the partial hedging of this currency put in place by the teams nevertheless protected $3.6 billion.

Québec: Ambition of $100 billion achieved ahead of schedule, with investments in local companies and impactful projects

In 2025, La Caisse’s assets in Québec reached $100.1 billion. The organization deployed $6.3 billion in new investments and commitments during the year.

Among the teams’ accomplishments, we note:

Support to grow companies in key sectors

• Innergex: Privatization of this renewable energy leader, bringing the enterprise value to $10 billion
• Boralex: $200-million financing, doubling existing debt financing in this company of which La Caisse has been a major shareholder for nearly ten years
• Honco Group: Minority interest to consolidate Québec ownership of this steel processing specialist
• Ocean Group: Additional investment in the context of the shareholder structure evolution of this maritime industry leader in Québec and Canada, bringing La Caisse’s stake to $120 million
• Germain Hotels: Lead of a $160-million financing round to accelerate its expansion and support the company’s succession

Structuring projects: An edge for Québec

• REM: Commissioning of the Deux-Montagnes branch, tripling the network’s coverage, with 19 stations spanning 50 km
• TramCité: Announcement of the six consortia qualified for two major contracts in the request for expressions of interest process, an important step in the procurement process for this 19 km tramway project in Québec City
• Alto Québec City-Toronto high-speed train: Cadence team, led by CDPQ Infra, selected as private partner by the Government of Canada and contract signed with the project authority
• Terrion: Transaction worth close to $1.3 billion to create, with Telus, the largest specialized wireless tower operator in Québec and to establish the head office in Montréal
• Laurentian Bank: Support for the acquisition transaction by National Bank and Fairstone Bank, through guarantees obtained to maintain Laurentian Bank’s commercial head office and to relocate Fairstone Bank’s head office to Québec
• AI expertise: Launch and implementation of a program powered by Vooban to support company productivity in the face of tariff challenges; recruiting for a new cohort currently underway

Climate: A new strategy for increased impact in all sectors of the economy

After exceeding the climate targets set in 2017 and then raised in 2021, La Caisse has developed a new strategy to accelerate the decarbonization of companies and significantly increase its investments linked to the energy transition by 2030, both in Québec and internationally. The objective remains: create sustainable value for depositors while managing the climate risks associated with its portfolio assets. La Caisse’s approach was well received by the Canadian group Shift: Action for Pension Wealth and Planet Health, which placed it first in its annual ranking.

By 2030, La Caisse aims to increase its Climate Action investments to $400 billion, in line with its commitment to carbon neutrality by 2050. This strategy is based both on investments in companies that clearly and credibly integrate climate issues into their business model, and on investments in climate solutions, i.e. companies, activities or technologies that help reduce carbon emissions. To find out more, visit this page or see the Sustainable Investing Report to be published in spring 2026.

Financial reporting

The costs incurred by La Caisse to conduct its activities include operating expenses, external management fees and transaction costs. In 2025, operating expenses decreased to 21 cents per $100 of average net assets, compared with 23 cents in 2024 and 26 cents in 2023. This significant reduction in the operating expenses over the past two years reflects the efficiency efforts made by the organization, particularly since the integration of its real estate subsidiaries. The total cost of internal and external investment management is 74 cents per $100 of average net assets as at December 31, 2025, compared with 67 cents in 2024 and 83 cents in 2023. Note that this figure varies depending on different factors, such as asset size, transaction volume and external management fees paid. Cost management remains a priority for the organization and, based on external data, La Caisse’s cost ratio is among the lowest in the industry.

The credit rating agencies reaffirmed La Caisse’s investment-grade ratings with a stable outlook, namely AAA (DBRS), AAA (S&P), Aaa (Moody’s) and AAA (Fitch Ratings).

About La Caisse

At La Caisse, formerly CDPQ, we have invested for 60 years with a dual mandate: generate optimal long-term returns for our 48 depositors, who represent over 6 million Quebecers, and contribute to Québec’s economic development.

As a global investment group, we’re active in the major financial markets, private equity, infrastructure, real estate and private credit. As at December 31, 2025, La Caisse’s net assets totalled CAD 517 billion. For more information, visit lacaisse.com or consult our LinkedIn or Instagram pages.

La Caisse is a registered trademark of Caisse de dépôt et placement du Québec that is protected in Canada and other jurisdictions and licensed for use by its subsidiaries. 

And here are the slides that accompanied the press conference this morning:

 

The slides provide a great snapshot of key activities by asset class and overall returns and along with the comments Charles Emond, Kim Thomassin and Vincent Delisle made during the press conference, I think they covered it all very well.

I would urge all of Canada's Maple 8 to do the same thing and post your press conferences on YouTube just like Norway's NBIM does. 

I'll give La Caisse's Communications department an A for this press conference (A+ if they post it on YouTube). 

Discussing 2025 Results With Vincent Delisle, Head of Liquid Markets at La Caisse

This afternoon, I had a chance to talk results and markets with Vincent Delisle, Head of Liquid Markets at La Caisse.

I want to thank him and Conrad Harrington who set up the Teams meeting.

Vincent began by giving me an overview of the results:

We're quite happy with the results. The RRQ, the CPP equivalent, comes in close to 10%. These results exceed the ask from our depositors. The funds are well funded, in very, very good health. What we're seeing is some strong returns from Public Equities, Infra and Credit which had a had a great year. Real Estate, still tough, but better than it was last year. Private Equity is somewhat disappointing for the year, coming in at 2% but it's been a significant tailwind in terms of performance on a 5 and 10 year horizon. Our business is to have a diversified portfolio focused on requirements from our depositors, adjusted for risk. So we're happy with the returns that we generated in today's environment where public equities had another stellar year in 2025, so it's been three years of very robust performing for all things public equities. It has an impact on our value added, because obviously our private portfolios -- private equity portfolios, benchmarked against that, Infra as well. So these are, these are challenges for our industry in terms of how the performance is perceived and and received, but we're quite happy with how we executed last year.  

I then asked Vincent specifically about PE: "A couple questions here on private equity. I don't know if you even know this. Were the returns mostly due to significant write downs taken in one or two investments, or was it just broad based valuation contraction of the multiples?"

He responded"

When you look at the private equity portfolio, profit growth for our companies was up six to 7% which is pretty much in line with what we're seeing in the industry. Valuations were hit by rising interest rates and there were one or two writedowns that took the numbers down from 6-7% to 2%.

In Real Estate, I told him I heard Charles say this morning that they sold some office towers in the US and he confirmed this:

Yes, we had some strategic dispositions in the US, absolutely. The key turnaround for this team in this portfolio, is going from a real estate operator to a real estate investor. And we were, we're rejigging the philosophy of this portfolio, rebuilding the team while the industry is going through some very, very challenging times. The numbers last year basically flattish on the year, better than what we did the year prior, at minus 11%, but it's still navigating within an industry that is see some significant headwinds.

I asked him what the split is at the Caisse between private and public markets and off the top of his head he said roughly 65/35 public vs private.

I then stated private credit and emerging market debt boosted the returns of the Credit portfolio and asked him to give me a bit more flavour there.

He shared this:

Just to be clear for us, Liquid markets includes public equities and all of fixed income, including private credit. So why is that? Our private loans mature within two to three years, so we get the liquidity coming back quite quickly. The emphasis here on liquid markets and then public. The credit portfolio had a stellar year in 2025, 9.6% absolute return outperformance relative to its benchmark and the way that portfolio has been structured from day one in 2017 was a hybrid between public credit and private credit. 

We do a lot of arbitrage to make sure that the premium that we're getting on the private side is worth, you know, giving away the liquidity. And we also have a the emerging market debt strategy in there that brings a very solid construction to the credit portfolio. It also brings volatility. I'm not going to lie to you, but when things work out like they did last year, we ticked all the boxes on the on the credit side. We didn't start doing emerging market debt last year. We've been doing it since 2017. What worked for us, or for emerging market debt in 2025 is a is basically a combination of two things, yields went down in markets in countries like Colombia, Brazil and Mexico, and their currencies appreciated. We had not seen that double that positive combo in recent years, so that was a significant driver of performance. On the private credit side, it was still a very, very, very good year, but the contribution from emerging market debt is really where the outperformance came from in 2025.

I asked him if he could give me the breakdown of the Credit portfolio which he did:

As of December 31 2025, 56% of the credit portfolio is allocated to privates, and remaining 44% is on the on the public side. Every year we're in our strategic plan. The goal, the objective, is to deploy $20 to $22 billion to new loans on the on the private side. In recent years, the amount of refinancing has been very elevated. So, for instance, last year we deployed $21 billion, we got $17 billion in refinancing, so the net increase was only $4 billion. But the teams can deploy, you know, they're very solid. The deployment is allocated to bank loans, direct lending, infrastructure debt, real estate debt, and also capital solutions team.

I told him I did see they are looking to double the private credit portfolio over the next five years and asked him if that's feasible.

He replied: 

It is feasible we can deploy. The teams are deploying north of $20 billion a year right now, getting north of $20 billion,we need refinancings to slow. And the thing we don't control is what happens on the public side. The key differentiator when you look at our credit portfolio relative to the Maple 8s, I think there are two differentiation. We do emerging market debt in there on the credit side, and we, we have the pool of public and private under the same house. There's an arbitrage. Every single deal that comes true has to be the public benchmark. I'm mentioning this because if credit spreads on the public side widen significantly, there will be a period where we're not going to allocate as aggressively on the credit side, but the strategic planning takes us above $120 billion.

He added: 

I think is very, very smart. And the portfolio was built that way in 2017 and we've seen instances where spreads widen significantly, and we can dial down, the tap, and then we dialed it back, back up. I think it's significant advantage. 

I moved on to public equities where I read they were underweight gold shares and some Quebec stocks  cost them some performance last year.

Vincent replied:

When you, when you look at the performance of our public equity portfolio, we outperform the MSCI World, and we outperformed the MSCI Emerging Markets. So our internal teams, our external teams, added value. It is a very tough environment to add value, and when you look at our positioning relative to the world, we're second quartile. And I'm very proud of that. The mandate where we had more difficulties last year was our Canadian mandate. We have some exposure to gold, but not to the same extent as the as the benchmark and a few Quebec stocks had more difficult years on a relative basis, that's the only mandate where we underperformed last year. So all things global, and I'm always very proud to mention this, but 100% of what we manage global and em internally, is managed here from our offices in Montreal, by our by our quant teams and fundamental teams, and they, they had a great year.

He told me their benchmark is MSCI Acqui for 80% and 20% is a Canada benchmark because their home bias and the large position they have in Canada.

We moved on to US stocks where I noted concentration risk was high again last year. I noted this year software stocks are getting slammed and chip stocks, especially memory, are surging again. 

Vincent noted the following:

There are a lot of things going on. So let me touch on a few topics, concentration and how it is making it challenging for investors. There's two concepts of concentration, the one that was very challenging form 2020 to 2024, was the concentration in the benchmark that was going up, so the FANGs become the Mag-7s, and all of a sudden, you know, the Mag-7s account for 33% or so of the S&P 500. 

The other aspect of concentration is concentration of gains. And even though the Mag-7s last year did not dominate. The concentration of gains was very, very high. So you take the time the 10 largest contributors to the S&P 500 last year, you get the 68% it was north of 50 in 2024 and 2023. In your average year, pre-Covid, you're running at 25 to 30% so that aspect, when you have a diversified portfolio, makes it very tough. 

How do we navigate this? In 2020 we had very little technology exposure. We had to do something. 2021, 2022 and 2023 we significantly increased our US / tech exposure, and we kind of capped it off in 2024 and in 2025 we reduced our US exposure as I mentioned this morning. 

We're trying to play that. We're trying, but we're much more selective in how we we get exposure to the AI thematic, the technology thematic. We find better opportunities outside the US. We don't want to play the hyperscalers just being naive and chasing the hyperscalers. So last year, what helped us is we reallocated some US exposure into European financials, Korean tech, Taiwan tech and Japanese industrials and financials. 

On AI. AI has been dominating everything since 2022 but the way AI dominates has changed significantly since last fall. And this year, it's quite amazing to see what's going on, because the big spenders, hyperscaler spenders, are not getting the retribution anymore. There's the market's much more selective and doesn't give the benefit of the doubt to everybody that's spending like like crazy, and then you have a whole SWAT of industries that are getting penalized because of the fear of of disruption.

Our thesis is that we think the markets can still move a bit higher but our thesis is that there's, there will be broadening of leadership. And there are many, many sector that have been left for dead in the last few years that are coming back alive this year. So the rotation is, is very visible year to date, not only geographically. Last year was more geography, but this year is more on the sectoral basis, energy, materials, transports, consumer staples, REITs. These are all names that have not been talked about leadership in in recent years. So very selective on how we play AI geographically, more more opportunistic on the EAFE space, and broadening participation is how we try to align our portfolios. 

I noted the S&P Equal Weight Index (RSP) is outperforming the S&P 500 (SPY) this year and this is a good environment for active managers.

Vincent shared this:

The environment of a concentration disadvantage that was prevailing in recent years, having the US equal weight outperforming the market cap weighting is going to make life easier for portfolios that are more diversified. And look at the spread right now on my screen, RSP plus six. Spider up one. Yes, it is an environment where actually being be more prudent. And, you know, diversifying within sectors and geography makes it, makes it easier to beat the benchmarks.

I told him that we are only two months into the year and things can change on a dime so it's too early to predict the end of tech this year.

He added:

We must not prematurely call it over. It kind of started in Q4 and it accelerated in January and February. And from our standpoint, the reason why this rotation has been ongoing is twofold. First, there's some signs of life, nascent signs of life in US and global manufacturing, the PMIs and the the ISMs have been in recession for over three years. The New Order components are now back above 50. If we get an ISM increasing type of market this year, then more cyclical, the real economy sectors should perform better. And the other reason why, we had to give credence and weight to this rotation out of tech. It's getting more complicated within the tech sector as well. Software is getting killed. Memory is skyrocketing every day, the hyperscalers, some are performing, others not. So it would be, would it be surprising to see tech as a whole come back with the same extent of domination, but it could happen. 

But he added:

Software is certainly one area where you have to ask yourself, is the selloff overdone? Because there's no doubt companies in every area will be changed by what AI brings to the table. But the speed at which we've seen market cap evaporate in many, many industries, it begs the question, how much is too much? Right? 

Lastly, I asked him what worries him in terms of the macro environment?

Vincent shared his concerns:

Interest rates is where I keep my focus. I'm worried that eventually we can't have our cake and eat it too like we have. We can't have an economy that gets somewhat better and rates moving moving lower. 2025 was all about tariff shock. 2025 was all about central banks cutting rates aggressively. 2026 could see some slight improvements in global growth, exports, trade, manufacturing. If that happens, then we start pricing the next move from central banks in 27/28. 

I am more focused on what changes the trend in interest rates. You know, we've been living with so many fears and headlines over the recent years. You know, tariffs, wars in the Middle East. I'm paying very close attention to oil, because oil doesn't get enough credit for how inflation was tame last year. Oil is up 15% one five. Year to date, it's only late February, that that could throw a wrench into the pretty inflation picture that we have. 

I asked him what he thinks about AI unleashing a massive deflationary wave and he said this:

Well, it's hard to argue against that because we don't have any concrete evidence yet. AI will certainly have the same positive impact on productivity as what we saw with with technology, the internet, in the 2000s and 2010. Then you have these, you know, population, immigration, you know constraints. Look at Japan, look at the US, look at Canada. I wouldn't say it's smooth sailing for inflation just because AI is, is upon us. 

Great food for thought, so pay attention to oil and rates as they might be moving up over the next two years.

I wrapped it up there and thanked Vincent and Conrad. 

Conrad subsequently responded to an email question of mine on currency hedging and how much the slide in the US dollar cost them last year:

Regarding currency hedging, we partially hedged the USD exposure. Through this partial hedge, we protected $3,6 billion. The USD had a negative impact of around $6 billion (it would have been close to $10 without hedging). Please see the find the relevant section from our press release (see above).

Alright, that's a wrap.

Below,The Caisse posted an annual return of 9.3% for 2025, a result that, however, fell short of its benchmark portfolio's return of 10.9%, due to "geopolitical tensions" and "persistent tariff uncertainty."

This difference compared to its benchmark portfolio means that the Caisse's return in 2025 was lower than that of the financial indices to which it compares its performance.

Nevertheless, Quebecers' savings are doing well, assures the Caisse, which points out that its five-year annualized return of 6.5% surpasses its benchmark portfolio's 6.2%. Over a 10-year period, the Caisse posted an annualized return of 7.2%, while its benchmark portfolio's return was 6.9%.

RDI's Olivier Bourque explains the details (in French).

I like this clip because a minute in, Charles Emond is quoted saying they're highly diversified, looking to hit singles and doubles, not home runs.  

Coordinated, industry-backed campaigns to weaken child labor protections continue to target state legislatures in 2026. Yesterday, the Indiana Senate passed a bill to completely eliminate requirements for businesses to document employment of minor workers, and it is expected to be sent to the governor after House and Senate versions are reconciled. The bill’s Senate sponsor, who owns a golf course that employs teen workers, also spearheaded 2024 legislation to weaken guardrails on work hours for the youngest teens and to lower the age at which teens can serve alcohol. Both of those bills were signed into law.

Child labor violations have been on the rise nationally and in Indiana, and fundamental federal child labor standards have recently come under threat. There is no reason to eliminate Indiana’s simple, easy-to-use system for documenting youth employment, except to make it easier for employers to violate child labor laws and harder for investigators to find out about violations.

Lawmakers in at least five other states have introduced bills to weaken child labor standards this year. Florida, Missouri, and Nebraska lawmakers have proposed allowing employers to pay minors less than the minimum wage, with the Nebraska bill recently being signed into law. Virginia and West Virginia lawmakers proposed bills to weaken hazardous work protections for minors who participate in work-based learning programs. Advocates in Virginia and West Virginia are working to amend both bills to limit their harm and ensure these programs do not come at the expense of youth education and safety.

Bill would eliminate employer registration system that replaced Indiana’s youth work permit process

In 2020, lawmakers eliminated Indiana’s youth work permit process and replaced it with the new Youth Employment System (YES), which requires certain employers of five or more minor workers to register key details about that employment in an online database, with penalties of up to $400 for each failure to register employment of a minor. Less than five years after they were implemented, lawmakers are now seeking to eliminate these requirements through House Bill (HB) 1302. If signed into law, there will no longer be any state oversight system in place for ensuring legal, age-appropriate work for minors or for state agencies to use in investigating suspected violations.

The legislation being considered is especially concerning because Indiana lawmakers have already made some of the country’s most extreme changes to child labor protections in recent years. Lawmakers made other substantial changes to Indiana child labor law in 2020, including eliminating rest breaks for minor workers and extending maximum weekly hours for 16- and 17-year-olds.

State systems for documenting youth employment are key to preventing child labor violations

Recent research shows that requiring the documentation of youth employment—like youth work permits—play an important role in preventing child labor violations, but Indiana got rid of work permits in 2020, and now they are hoping to get rid of the system that replaced them. In an analysis of federal child labor violations between 2008 and 2020, states with work permit mandates had 13.3% fewer violation cases and 31.8% fewer minors involved in these violations. That’s because youth work permits ensure employers know the law and create a paper trail to aid in enforcement when state investigators suspect violations. According to the new study, requiring that work permits clearly state permitted working hours reduces the number of minors involved in violations by 24.0%.

Often, employers that violate mandated documentation requirements are also violating other child labor standards. For example, a recent audit of a major Burger King franchisee in Wisconsin found over 1,600 child labor violations affecting nearly 1,400 young workers, the largest in the state’s history. In addition to employing minors without a work permit, violations included failing to provide mandated rest breaks, employing minors beyond permissible working hours, and failing to pay overtime.

Sadly, lawmakers’ desire to eliminate the YES system may be precisely because the system has been working as intended. Last year, the Indiana DOL assessed over $250,000 in penalties on employers that failed to register youth employment. Indiana’s youth employment registration system allowed investigators to identify employers out of compliance with the registration law and may have played a role in deterring future, more serious violations.

As violations increase, lawmakers should seek to strengthen—not weaken—youth employment standards

Child labor violations have risen significantly in recent years across the U.S. and in Indiana, where a 2025 IndyStar analysis found an uptick in violations in recent years, particularly driven by instances of illegal hazardous child labor and illegal employment of children under age 14. According to state fiscal analysts who assessed HB 1302’s impact, the change “will likely reduce the efficiency of on-site employer inspections for compliance with child labor laws.” In other words, the legislature’s own analysts acknowledge that this bill will make it harder to protect Indiana children from illegal and potentially dangerous, exploitative, and abusive employment conditions.

There is no rationale for eliminating basic documentation requirements that prevent child labor violations and aid in enforcement, except to make it easier for unscrupulous employers to get away with breaking the laws that keep kids safe on the job. Coming on the heels of multiple bills that weakened Indiana’s child labor standards in the past few years, HB 1302 represents another shameful step backward for the state. But it is not too late for Indiana to reverse course. If the bill is sent to the governor, Indiana Governor Mike Braun can break with his party to veto the bill, just like Ohio Republican Governor Mike DeWine did when he vetoed a bill to extend working hours for minors late last year. At a time when federal child labor standards are under threat, state lawmakers have an opportunity and responsibility to resist efforts to weaken child labor protections and, instead, consider any of the numerous, proven options to strengthen them.

Paula Sambo of Bloomberg reports Canada Pension Plan board names veteran David Colla as credit chief:

Canada Pension Plan Investment Board, the country’s largest such money pool, named insider David Colla as global head of credit investments, elevating a private-debt specialist after the strategy posted returns in the teens last fiscal year.

Colla, who joined CPPIB in 2010 and most recently led its capital solutions group, will assume the role April 1 and join the senior management team, the pension manager said Tuesday. He succeeds Andrew Edgell, who led the credit platform for five years and nearly doubled its size. Edgell will move to a senior adviser position.

Chief executive John Graham said Colla’s experience across leveraged finance and structured credit will help the unit for its “next phase,” as private debt takes on a larger role within the portfolio.

CPPIB returned 14.4 per cent in the credit asset class in the fiscal year ended March 31, 2025.

Colla previously oversaw growth in leveraged finance and structured credit and has been closely involved in CPPIB’s relationship with Antares Capital, where he serves on the board. The Chicago-based firm, which was acquired by the pension fund in 2015, is an alternative credit manager that had more than US$85 billion of assets as of last June.

Previously, Colla worked at Oaktree Capital and JPMorgan Chase & Co., according to his LinkedIn page.

Private credit has drawn rising allocations from global pensions as banks pull back from riskier lending. Higher interest rates have also boosted yields on senior secured loans, making the asset class attractive for long-term investors seeking income and downside protection.

CPPIB has maintained an active deployment pace. In the quarter ended Dec. 31, it committed or invested more than US$800 million across credit transactions, including loans to automotive software company OEConnection and real estate restoration firm Servpro. 

Earlier today, CPP Investments announced the appointment of David Colla as Senior Managing Director & Global Head of Credit Investments:

TORONTO, ON (February 24, 2026) – John Graham, President & CEO, Canada Pension Plan Investment Board (CPP Investments) announced today the appointment of David Colla as Senior Managing Director & Global Head of Credit Investments, effective April 1, 2026. He will join the organization’s Senior Management Team.

Colla succeeds Andrew Edgell, who has decided to step away from his role as Senior Managing Director & Global Head of Credit Investments. After 18 years in a range of senior leadership positions at CPP Investments, Edgell will continue with the organization as a Senior Advisor.

“David is an experienced and highly regarded investor with deep expertise across the credit spectrum,” said John Graham. “Over the past 16 years, he has been instrumental in building and scaling our credit platform, including the growth of our leveraged finance and structured credit capabilities. His strong investment judgment, commitment to partnership and focus on talent development position him well to lead Credit Investments into its next phase.”

Colla joined CPP Investments in 2010 and most recently led the Capital Solutions Group. During his tenure, he has overseen the expansion of the Americas Leveraged Finance and Structured Credit businesses and played a key leadership role in the acquisition and ongoing management of CPP Investments’ investment in Antares Capital. He serves on the boards of Antares Capital and Antares Holdings.

“Andrew has made countless contributions to CPP Investments throughout his career,” added Graham. “Over the past five years, as Global Head of Credit Investments, he has led the continued growth and performance of the credit business, nearly doubling the size of the portfolio. We are grateful for his leadership through the years and are pleased he will continue to contribute to the organization in his new role.”

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Canada Pension Plan Fund in the best interest of the more than 22 million contributors and beneficiaries. In order to build diversified portfolios of assets, we make investments around the world in public equities, private equities, real estate, infrastructure, fixed income and alternative strategies including in partnership with funds. Headquartered in Toronto, with offices in Hong Kong, London, Mumbai, New York City, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At December 31, 2025, the Fund totalled C$780.7 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or on X @CPPInvestments.

Alright, big news at CPP Investments so let me begin by congratulating David Colla, the new Global Head of Credit Investments, effective April 1st.

Was I surprised David was appointed to head up Credit Investments? No, he's a top credit investor with years of experience, I would have been shocked if he didn't get that position.

I think what surprised me was why did Andrew Edgell who led the credit platform for five years nearly doubling its size decide to step down and be a senior advisor to the CEO?

Andrew is a really sharp and nice guy, I have spoken to him a couple of times and like him a lot. 

In fact, I think highly of him and David Colla (they're both first-class on every level). 

So it surprised me that he's decided to step down.

There has been a lot of negative press lately in the private credit industry and some think this may be performance related but Credit Investments at CPP Investments are doing very well, they're the top institutional investor in the world in this space.

I reached out to John Graham for a comment and he graciously replied:

"Certainly a lot of noise about private credit right now, but this leadership transition is totally unrelated. Andrew came to me a year ago and shared that he wanted to move out of the day to day of running a large department, give David Colla a well-deserved opportunity and focus on some other high priority initiatives. Andrew is still with CPP Investments, will continue to serve on investment committees and will lead some CEO special initiatives."

Now, I'm not going to lie, when I read that reply, the first thing that went through my head is they're grooming Andrew Edgell to become the next CEO.

Why? When a senior managing director steps down from a critical portfolio to work on "CEO special initiatives", it typically means he or she is getting the lay of the land and is being groomed for the top job.

I might be off, way off, but I've spoken to Andrew and he can easily be the next CEO of CPP Investments (don't forget, John Graham was his predecessor before assuming the top job exactly five years ago). 

Having said this, I bounced this idea off a senior executive at CPP Investments who shared this with me: 

"I agree that both (Andrew and David) are stars in their own right. Still, the depth of talent at CPP Investments runs deep and wide, and with a Board of Directors taking succession planning very seriously at various key levels and roles, I believe with such a deep pipeline of talent it might be a little too speculative..."

No doubt about it, the depth of talent at CPP Investments runs deep and wide so maybe it's premature to assume anything at this point until an official announcement is made.

Anyway, those are my thoughts on this nomination. I want to reiterate, David Colla is the best person to lead Credit Investments at this time and that's why he was chosen to replace Andrew Edgell who is an equally outstanding leader and investor in his own right.  

I wish then both well.

Below, private credit, a form of lending by non-bank financial institutions to businesses outside of public markets, was once a niche corner of Wall Street. Now, private credit is going mainstream as it seeks funding from retail investors. CNBC’s Hugh Son breaks down the rise of private credit, why retail investors are looking into private credit and the risks and upsides of investing in the space (a month ago).

Also, Dan Nathan and Guy Adami are joined by Jen Saarbach and Kristen Kelly of The Wall Street Skinny to discuss two major developing market stories ahead of meeting in Miami for the iConnections Global Alts conference. 

The first topic is stress in private credit, centered on Blue Owl’s retail-focused semi-liquid vehicle (Blue Owl Capital Corp II) facing heavy redemptions and gating, highlighting the liquidity mismatch between retail redemption needs and long-dated loan assets. They contrast the gated evergreen structure with Blue Owl’s publicly traded BDC that was trading roughly 20% below NAV, discuss Blue Owl’s reported loan sales near NAV, and explore why the issue is pressuring related stocks like Blue Owl and Blackstone despite an S&P 500 that appears indifferent. 

The group connects the private credit conversation to how AI/data center buildouts are financed, including references to Meta-related structures and concerns about CoreWeave’s ability to raise capital for data center obligations, and notes that credit markets often reprice quickly only after complacency breaks. 

The second topic is prediction markets, focusing on Kalshi and its partnership with Tradeweb to publish analytics and potentially enable institutional trading of binary outcomes on events like Fed decisions and macro data, raising questions about democratized access, liquidity constraints, regulatory gaps, spoofing, and the role of insider information, along with implications for politics and whether more information is always better.

We’re a little over a year into the second Trump presidency. That second term began with the establishment of “The Department of Governmental Efficiency” (DOGE), a sustained campaign to discredit and undermine the usefulness and work of federal institutions and employees, and the issuance of multiple executive orders rescinding prior guidance on equity, including those related to federal affirmative action. The dismantling of entire federal agencies, alongside massive cuts in their capacity to make progress toward equity goals, swiftly followed (USAID, HHS, and the Department of Education are some of the most impacted agencies). During the summer of 2025, Republicans passed a spending bill that massively increased the size and scope of Immigration and Customs Enforcement (ICE), while giving huge tax breaks to the wealthiest Americans and making drastic budget cuts to social assistance programs.

Throughout this second term we’ve also seen a steady increase in white supremacist rhetoric and images coming from government officials: Agency-run social media accounts make appeals to the homeland, remigration, and other white nationalist dog-whistle phrases, while the president himself continues to demonize nonwhite immigrants and cities with large minority populations, and to mischaracterize the Civil Rights Movement as harmful to white people.

These actions and rhetoric are not simply poor governance; they follow a historical script that white supremacists in the United States have used for centuries to undermine progress toward equity. Each time, that script sets the stage for policy changes that lead to a massive increase in economic inequality. Here’s the pattern:

1. Establish distrust in progressive goals by raising the specter of racial minorities corrupting and taking advantage of a government that has “overstepped its authority.”
2. Severely curtail government functions by dismantling existing programs directed toward progressive policy goals (e.g., equity, poverty prevention) and allowing others to expire, halting forward progress.
3. Institute methods of targeting and controlling nonwhite populations, increasing economic insecurity, stoking fear, and lowering their political and economic power relative to white peers.

Consider what took place in the half-century following the Civil War, as the United States tried and failed to rebuild itself into a multiracial democracy for the first time:

1. Establish distrust: Disaffected ex-Confederates led campaigns of misinformation alleging that newly elected Black government officials were corrupt and undeserving, that the government itself had overreached by sending federal troops to ensure that Southern states followed the law with respect to racial inclusion, and that allowing Black men the vote presented an existential threat to white men, women, and children. In the West, white supremacists spread similar misinformation about Chinese immigrant workers.
2. Halt forward progress: Federal troops were removed from Southern states, exposing Black families to horrific acts of economic, social, and spiritual violence from white vigilantes; institutions like the Freedmen’s Bureau and Freedman’s Bank were dismantled and allowed to collapse, curtailing progress toward integrating Black families into the U.S economy with dignity.
3. Target and control nonwhite populations: White supremacists in government passed legislation limiting the economic, social, and political rights available to nonwhite Americans, most notably Jim Crow laws and the Chinese Exclusion Act. These policies led to significant economic precarity for nonwhite workers, allowing exploitative systems like sharecropping to thrive and ensuring railroad workers and miners had little recourse to protest poor working conditions.

This reassertion of white supremacy saw the government take a big step back from progressive goals and ushered in one of the most unequal and unstable ages of U.S. economic history: The Gilded Age.

For a more recent example, consider the 40-year-long backlash to racial progress made in the mid-20th century through the efforts of the Civil Rights Movement (beginning with the first Reagan administration in 1980):

1. Establish distrust: Disaffected conservatives employed an intellectual strategy (neoliberalism) designed to cast government as the source of America’s economic woes, rather than a tool that could be used to alleviate them. Neoliberalism recast the social safety net that had been designed to keep poor and working-class families, children, and the elderly out of poverty as a hammock in which lazy, undeserving Black people (especially single Black mothers) could comfortably take advantage of taxpayer dollars.
2. Halt forward progress: Citing the myth of an undeserving, perpetually dependent “underclass,” Republican and Democratic administrations alike took action. They made major cuts to programs designed to alleviate economic hardship, halting progress toward closing racial gaps in poverty because Black families are more likely to be impoverished. The federal government added strict work and income requirements to social programs like food stamps (SNAP) and Aid to Families with Dependent Children (AFDC, eventually replaced by the much less adequate TANF) that decreased their efficacy. The government stripped institutions devoted to enforcing and advancing civil rights like the EEOC and the Commission on Civil Rights of funds and reduced their scope.
3. Target and control nonwhite populations: Beginning in the 1970s the United States embarked on an unprecedented expansion of policing and the carceral state; the development of this mass incarceration led to an explosion of arrests, convictions, and crucially, imprisonment. Nonwhite men were and still are overwhelmingly the targets of this system, with Black incarceration rates six times higher than those of white people. Incarceration serves as a tool of economic stratification that renders Black and brown workers noncompetitive with white workers and severely limits the capacity of Black and brown families to accumulate wealth, alongside a host of other imposed disadvantages.

The wealthiest owners of capital used white supremacy to shape policy decisions such that they could capture a greater share of economic power and resources, influencing government to withdraw resources previously used to support and protect workers and families of all shades. This also set the stage for weakening labor standards, chipping away at workers’ rights to organize, allowing globalization to displace blue-collar workers, and influencing the Fed’s tolerance of excessive unemployment.

Further, as more of our national spending shifted toward law enforcement rather than social welfare, racial targeting increased, poverty was criminalized, and so too did a greater share of income go to the top percentile earners. Significant progress toward racial economic equity—little that there was—has all but ceased since the 1980s.

Figure A shows the raw deal that both Black and white workers have been given since the 1980s. While the workforce became around 84% more productive between 1979 and 2024, workers’ wages grew much more slowly. Typical white workers’ wages only grew 37% over the same period, while Black workers’ wages grew even more slowly at 28.5%.

Figure A

Figure B shows how racial wage inequality increased along with rising corporate power. The darker line here represents the extent to which workers’ productivity increased faster than their pay (the ratio of net productivity—or output per hour—to total compensation per hour); in other words, the extent to which employers were able to capture a greater share of economic output than workers. As the wage gap between typical Black and white workers increased (from 16.6% in 1979 to 21.6% in 2024, a growth rate of 30%), so too did the gap between productivity and pay (from 160% in 1979 to 227% in 2024, a growth rate of 42%). In this view, white supremacy works as a wedge by which the working class is separated, weakening worker power and allowing the productivity-pay gap to increase.

It took the labor market shock and reset of a global pandemic, and the rapid, expansionary policy response toward it, to finally break the decades-long trend of increasing Black-white wage inequality; the resulting tight labor market saw faster wage growth between 2019–2024 for low-wage workers (who are disproportionately Black and brown) than for any period since 1979, and a drop in the Black-white wage gap from its peak in 2018 at 26.4% to 21.6% in 2024. This relatively rapid reduction in Black-white income inequality provides important context for our current wave of white supremacist backlash.

Figure B

White supremacy has always been employed in the United States as a political economic strategy for maintaining social hierarchy. That hierarchy is consistent both with the assertion of white privilege and with corporate interests. The value in maintaining white supremacy for the interests of wealthy elites is that it complicates class solidarity across racial lines, while also pre-establishing a population of workers who exist along a spectrum of exploitation.

The most exploitable of these workers (e.g. Black, brown, women, and/or poor workers) have little to no recourse for protection nor serious prospects of changing their class position without explicit outside intervention, even across generations. Workers with more proximity to power (e.g. white, male, and/or high-income workers) have access to real social and material benefits that come from their relative position, and so are incentivized to maintain the status quo. Even still, these workers face exploitation and economic precarity as the truly wealthy continue to build capital, and their share of the nation’s income and wealth continues to rise.

The Trump administration’s motivations are clear when viewed through the lens of white supremacist political economy. This framing puts Project 2025 into its proper historical context as a recycled agenda designed to reassert the social and economic privileges of white Americans relative to their Black and brown neighbors, pacifying potential white opposition toward policies that will most enrich the few at their absolute expense. If this historical script is allowed to run its course—that is, if the administration is successful at establishing distrust in the efficacy of government, halting what forward progress we’ve made toward equity and progressive goals, and targeting and controlling nonwhite populations—the final act will be another massive increase in economic inequality and instability, a period in which most American families will suffer.

There is a path forward, however. Progress toward racial equity has always threatened consolidated class power, particularly in the United States. A working-class coalition across racial lines has historically been a dangerous prospect for those invested in maintaining inequality because it creates the possibility of a serious inversion of power, a realization that solidarity could genuinely result in a more equitable distribution of the costs and benefits of production. Building a genuine multiracial democracy in which people from all groups can expect to be treated with dignity and have access to the same economic security and opportunity is a real path toward breaking down inequality run rampant.

Here’s the bottom line. When we see:

• A concerted effort to discredit and defund the important work done by Black and brown women government employees to move us toward equity (Establish distrust)
• The tearing down of historic laws and institutions devoted to providing equal access to opportunity and security to all Americans (Halt forward progress)
• The terrorizing of nonwhite workers and their families in places of work and worship alike (Target and control nonwhite populations)

We must recognize these efforts as intentional ones that lead us all—white workers and their families included—down a path to greater economic inequality, instability, and injustice.

James Bradshaw of the Globe and Mail reports OMERS pension fund reports 6% gain as weak U.S. dollar dents investment returns:

Ontario Municipal Employees Retirement System (OMERS) gained 6 per cent on its investments in 2025, lagging its benchmark but earning positive returns across most its portfolio in what chief executive Blake Hutcheson called “one of the most difficult years in my career to invest.”

The pension fund manager’s annual performance was hampered by a weakening U.S. dollar, which dragged returns down by 1.3 percentage points, and poor performance from private equity investments, which lost 2.5 per cent.

All other asset classes had positive returns for the year, led by a stock portfolio that gained 12.3 per cent, as public markets surged largely on optimism about technology and artificial intelligence.

That market optimism was overshadowed by political turmoil and wars around the world, as well as the disorienting effect that shifting tariff policy has had on investors. The uncertainty stemming from U.S. President Donald Trump’s protectionist push affected currencies, interest rates and asset prices, “and frankly, it impacted our day-to-day decision making,” Mr. Hutcheson said in an interview.

“All I want to know is that I’ve got an environment where someone doesn’t wake up and break your jaw,” he added. “Why I think it’s difficult now is it’s just so unpredictable, the goalposts keep getting moved.”

OMERS fell short of its internal benchmark for returns, which was 7.5 per cent, though currency losses accounted for much of that gap and aren’t accounted for in the target. OMERS was able to offset a further 70 basis points of potential currency losses by hedging against fluctuations in the market.

“Given all that ... it’s an acceptable outcome,” Mr. Hutcheson said.

OMERS invests on behalf of nearly 665,000 Ontario public service workers at school boards, transit systems, electrical utilities and emergency services, among other employers. Its assets increased to $145.2-billion at the end of 2025, up from $138.2-billion a year earlier.

The plan has earned an average annual return of 7.7 per cent over the past five years, and 7.1 per cent over 10 years.

Even now, the United States is “not a market you would ignore,” accounting for 26 per cent of global economic output, and it will remain a big part of OMERS’s strategy, Mr. Hutcheson said. “Having said that, it’s a cautionary time.”

OMERS is looking at whether it can “pivot to Canada” for some of its deals at a pivotal moment for the country’s economy – as long as any potential transactions meet the bar for risk and return that guides the fund’s mandate.

“We want to do more in Canada,” where OMERS has a home-field advantage and a significant portfolio of real estate and other investments, he said. But infrastructure investment has been harder for the pension plans, with too few opportunities that they deem to be attractive.

“Actual opportunities have to be put on the table,” he said, and OMERS is “encouraged that those are on the horizon.”

OMERS’s global infrastructure portfolio gained 6 per cent last year.

In private equity, buyers and sellers are starting to be more realistic about what companies are worth, chief financial officer Jonathan Simmons said. But for deals to pick up, company profits need to start rising in a meaningful way, and interest rates need to stay low.

For private equity investors, “it was a very difficult year, let’s not kid ourselves on that front,” Mr. Hutcheson said, and a full recovery for the sector could take years. “This doesn’t turn on a dime.”

OMERS had stronger performance from its private credit book, which earned 8.3 per cent in 2025. More recently, stock prices for large private credit lenders have wobbled as U.S.-based Blue Owl Capital Inc. halted redemptions for one of its funds and sold a US$1.4-billion portfolio of loans to several pension funds, with OMERS reportedly one of them.

The fund declined to comment on Blue Owl’s sale, but said it has stuck to a strategy “to hold the pen on credit underwriting and not to give it away, and that is serving us well,” Mr. Simmons said.

OMERS improved from being 98-per-cent funded in 2024, based on projected payouts to pensioners, to 99 per cent at the end of last year. The plan expects to be fully funded soon, and to manage $200-billion of assets by 2030. 

Layan Odey of Bloomberg also reports OMERS earns 6% as stock gains offset losses from private equity, U.S. dollar:

Ontario Municipal Employees Retirement System returned six per cent last year after gains from stock holdings and private credit more than offset private equity losses and a weak dollar.

That brings its net assets to $145.2 billion last year, up from $138.2 billion in 2024, the pension said in a statement Monday.

“Volatile currency markets create challenges for many investors who invest abroad,” chief executive Blake Hutcheson said in the statement, adding that decisions to hedge currencies helped “limit the foreign exchange impact on our results to negative 1.3 per cent, driven mainly by the strong decline in the value of the U.S. dollar.”

Public equity holdings gained 12.3 per cent last year, while private credit and infrastructure delivered 8.3 per cent and six per cent returns, respectively. Investments in private equity lost 2.5 per cent, compared with a 9.5 per cent gain in 2024.

The pension plan has revamped its private equity group over the past two years, including hiring a new global head, halting direct buyouts in Europe and cutting a team focused on the asset class in Asia.

Earlier this month the private equity arm agreed to sell specialty care management company Paradigm to Patient Square Capital, and in December CBI Health, one of OMERS’ longstanding portfolio companies, agreed to sell its home-care business to Extendicare Inc. in December.

Omers said that it is “well-positioned” to invest in Canada and that it’s seeking “near-term opportunities in Canada that will support both our objectives and the country’s growth.” 

The Canadian Press also reports pension fund manager OMERS earned six per cent return for 2025:

TORONTO - Pension fund manager OMERS says it earned a six per cent return for 2025, helped by the strength of its public equities and private credit investments.

The Ontario fund manager says its net assets grew to $145.2 billion at Dec. 31, up from $138.2 billion a year earlier.

OMERS chief financial and strategy officer Jonathan Simmons says the portfolio generated steady performance against a backdrop of significant political and economic uncertainty, particularly around trade in 2025.

Simmons noted that six out of the fund’s seven investment asset classes delivered positive returns, led by a third year of double-digit returns from public equities and another strong year for private credit investments.

The pension plan’s smoothed funded status improved to 99 per cent, up from 98 per cent in 2024.

OMERS manages the defined-benefit pension fund for employees of municipalities, school boards, local boards, transit systems, electrical utilities, emergency services and children’s aid societies across Ontario. 

Earlier today, OMERS released its 2025 results stating it earned an annual investment return of 6%, or $8.2 billion, net of expenses:

OMERS, the defined benefit pension plan for Ontario’s broader municipal sector employees, earned a 2025 investment return of 6%, or $8.2 billion, net of expenses. Net assets grew from $138.2 billion at December 31, 2024 to $145.2 billion at December 31, 2025. The Plan’s smoothed funded status improved to 99%, from 98% in 2024, using a real discount rate of 3.70%. Over the past 10 years, OMERS has averaged an annual investment return of 7.1%, net of expenses, adding $73.9 billion to the Plan, and contributing significantly to improving the Plan’s funded status.

Steady progress in 2025

“OMERS performance in 2025 demonstrates the resilience of our plan amidst a turbulent market. Since becoming CEO, I have been proud to lead a team committed to delivering enduring value for our 665,000 members by maintaining a disciplined investment approach. Over the past five years, we have generated an average annual net return of 7.7%,” said Blake Hutcheson, OMERS President and CEO. “Our 2030 Strategy positions the Plan well for further success in the years ahead. We expect to have $200 billion in net assets by 2030, and will be more than 100% funded.”

OMERS is diversified by asset class and geography, and this broad asset base helps to insulate the Plan through the challenges that each market cycle brings. In any given year some asset classes will perform more strongly than others, depending on market and economic conditions.

“Our portfolio served us well in 2025 generating steady performance against the backdrop of significant political and economic uncertainty, particularly around trade. Despite this, six out of our seven investment asset classes delivered positive returns, led by a third year of double-digit returns from public equities and supported by another strong year for private credit investments,” said Jonathan Simmons, OMERS Chief Financial and Strategy Officer. “We continue to navigate a persistently challenging private equity market.”

“We are pleased to see a recovery in our real estate portfolio, with good performance in office and retail, as the industry emerges from several difficult years,” remarked Hutcheson. “Volatile currency markets create challenges for many investors who invest abroad. We are certainly not alone in facing this issue, particularly as it relates to the U.S. dollar. Active decisions to hedge currencies protected 70 basis points of our return for the year. This helped to limit the foreign exchange impact on our results to negative 1.3% driven mainly by the strong decline in the value of the U.S. dollar."

Ready to Invest More in Canada

OMERS is well-positioned to invest across geographies of focus, including in Canada where we expect new opportunities to emerge.

“This is a pivotal time in Canada. As a nation, we have a significant opportunity to build a stronger and more resilient future, and OMERS wants to be part of that. We are a proudly Canadian pension plan with a deep history of investing in our home market. We like the advantage that our relationships and on-the-ground expertise offer,” said Mr. Hutcheson. “Any transactions we might undertake will have to meet the high bar we set for managing the Plan on behalf of our members, but we aspire for near-term opportunities in Canada that will support both our objectives and the country’s growth.”

Building for the Future

Funded status is a key measure of the Plan’s long-term financial health.

“The improvement in OMERS smoothed funded status to 99% was attained while at the same time strengthening provisions to pay pensions by an additional $2.2 billion to reflect longer life expectancies,” said Simmons. “Canadians—including our members—are living longer and the Plan is ready to meet their retirement needs in the decades ahead.”

Our work continues to prioritize initiatives that safeguard future returns. OMERS is reporting a 65% reduction in its portfolio carbon emissions intensity relative to the 2019 baseline, and increased its green investments (as defined in the OMERS Climate Action Plan) to $26 billion.

Making an Impact

A recent study by the Canadian Centre for Economic Analysis found that OMERS 2025 activities in Ontario generated $15.3 billion in provincial GDP, supported more than 135,000 jobs, and positively impacted 1 in 11 households. Across our investments, pensions, and corporate teams, OMERS employees continue to look for ways to innovate and deliver on our pension promise with excellence.

“Our members, who work to keep our communities healthy and safe, face a world that feels more complex every year. Our job is to provide a stable source of retirement income that helps bring them peace of mind,” said Hutcheson. “We have built a Plan that sees through cycles, periods of uncertainty and decades of change. I am proud of the way our teams have invested with conviction, provided excellent service to our members, and provided promised pensions, on time and as planned, for almost 65 years.”

OMERS is highly rated across independent credit rating agencies, including ‘AAA’ ratings from S&P, Fitch, and DBRS.

About OMERS 

OMERS is a jointly sponsored, defined benefit pension plan, with more than 1,000 participating employers ranging from large cities to local agencies, and 665,000 active, deferred and retired members. Our members include union and non-union employees of municipalities, school boards, local boards, transit systems, electrical utilities, emergency services and children’s aid societies across Ontario. OMERS teams work in Toronto, London, New York, Amsterdam, Luxembourg, Singapore, Sydney and other major cities across North America and Europe – serving members and employers, and originating and managing a diversified portfolio of high-quality investments in government bonds, public and private credit, public and private equities, infrastructure and real estate.

Net Investment Returns for the years ended December 31

2025

2024

Government Bonds

2.9%

1.0%

Public Credit

3.9%

6.0%

Private Credit

8.3%

12.6%

Public Equities

12.3%

18.8%

Private Equities

-2.5%

9.5%

Infrastructure

6.0%

8.8%

Real Estate

5.1%

-4.9%

Total Net Return

6.0%

8.3%

Asset Mix

As at December 31, 2025

Assets by Geography

As at December 31, 2025

Investment Performance Highlights

Over the year ended December 31, 2025:

• Currency detracted 1.3% from our returns, particularly impacting public and private equity. The U.S. dollar depreciated against all other G7 countries in 2025, marking its worst annual performance in years, weakening almost 5% against the Canadian dollar over the year. Our active decisions to hedge our currency exposure protected 70 basis points of returns. This currency management strategy, combined with our diversification in the euro and British pound sterling, mitigated some of the negative U.S. dollar impact on the portfolio.

• Our ongoing strategy to allocate funds to fixed income contributed to our overall returns. Government bonds, public and private credit each delivered positive performance primarily due to interest income and a decline in bond yields.

• Public equities delivered double-digit performance from core large-cap holdings in information technology, communication services and financial sectors, with most other sectors contributing positively.

• Private equities continued to face a challenging market. Deal market activity was low and valuations continue to be impacted by slow earnings growth and headwinds within certain industry sectors.

• Infrastructure continues to deliver steady results. While the majority of our portfolio performed well, headwinds on select assets softened the asset class return.

• Real estate delivered a positive return after a series of challenging years for the industry. Results were supported by strong operating fundamentals, particularly in office and retail.
  

2025 Highlights

By the numbers

• 2025 investment return of 6%, or $8.2 billion, net of expenses

• $145.2 billion in net assets

• 10-year average annual net return of 7.1%

• 665,000 OMERS members

• 99% smoothed funded ratio

• 3.70% real discount rate

• $6.8 billion total pension benefits paid

• We are reporting a 65% reduction in the portfolio carbon emissions intensity, relative to 2019

• $26 billion in green investments (as defined in the OMERS Climate Action Plan)

• 97% OMERS member service satisfaction

• 99% Employer satisfaction

• 93% of employees are proud to work for OMERS and Oxford (+5 points above best-in-class)
  

Transactions in 2025

OMERS remains focused on deploying capital in line with our target asset mix. We are a disciplined investor in high-quality assets that meet the Plan’s risk and return requirements. Highlights of transactions made in 2025:

• Announced the acquisition of a Manchester industrial estate from Network Space Developments. This transaction was the first for the newly formed Oxford Properties and AustralianSuper joint venture.

• Completed offerings of EUR 1 billion, 10-year term note at a yield of 3.253% and USD 1 billion, 5-year term note at a yield of 4.434%.

• Participated in the Series B financing round for Float Financial, a finance platform for Canadian businesses.

• Acquired full ownership of a high-quality, $1.5 billion Western Canada office portfolio.

• Announced a transformative co-investment of over $200 million to retrofit the existing office buildings at Canada Square in midtown Toronto.

• Broke ground on the first major purpose-built housing project in Scarborough in over a generation. The development will consist of three residential towers of 1300 units with the aim of delivering critically needed housing, including a 21% allocation for affordable housing.

• Completed Canada’s largest co-op housing renewal project in Vancouver.

• Participated in a US$275-million private investment supporting Xanadu Quantum Technologies, a Toronto-based leader in photonic quantum computing.

• Completed the inaugural senior unsecured bond issuance for BPC Generation Infrastructure Trust (BGIT), the holding company for OMERS investment in Bruce Power. The offering totaled C$1.5 billion.

• Secured €770 million in new debt facilities at Borealis Spain Parent B.V., the holding company for OMERS ~25% stake in Exolum.

We rotate capital out of assets with the same level of discipline with which we invest. This activity generates capital, which we deploy into future investment opportunities that align to our strategy. Highlights of realizations announced or completed in 2025:

• Completed the sale of a 9.995 per cent stake in Australian electricity network firm Transgrid to the Future Fund Board of Guardians.

• Sold our stake in London City Airport.

• Announced the sale of CBI Health LP’s home care business to Paramed Inc – the closing of the transaction is expected to be completed in Q1 2026.

I had a chance to discuss OMERS' 2025 results with CEO Blake Hutcheson and CFO & CSO Jonathan Simmons earlier today so let me get right into it.

I want to begin by thanking both of them for taking the time to talk to me and also thank Don Peat for setting up the Teams meeting. 

Blake began by giving his his high level overview:

The punchline is 6%, we made $8.2 billion. We have about 3000 people, by the way, about about half and half Oxford and OMERS. And I often remind them that when you make $8.2B and in a good year, it's north of 10 with a small handful of people, they're all making a difference. And we have a great team in the country, and I'm proud of them. 

We had last year, quite honestly, it was one of the most difficult investment environments that we've ever that I've ever experienced and and the punchline for me is, as a business person and an investor, I don't ask for a head start. I didn't ask for a leg up. I don't I don't ask for anybody to give me an advantage. I just need to know the rules of the game. And if I know the rules of the game, you know, I, I we owners in Oxford, I like our odds to compete with the best of the best, and an environment where there's tariffs on, off, geopolitical, you know, shifts, not only in the US and Canada, but around the world. Most of our markets are having, you know, is Starmer going to make it? Who's the next? You know, President of France? Like all these markets, the geopolitical turmoil, the tariff turmoil, and the impact of, you know, policy decision making changing on a dime has been, has made it extraordinarily different, difficult, and it's it's hitting our currencies, it's hitting our equities, but most importantly, or notably, it hits our day to day decision making. You know, which you know, where do you allocate capital? Where do you hold back? Often, with partners, they may have a different view because, because they're getting confounded by the change the same way we do, some of our banks and counterparties may have a different view. 

And I just never seen an environment where you didn't have a predictable future. And as I often say, just don't break my jaw.And this has been a jaw-breaking environment for I think all of us as significant investors in a Canadian and global context, and given that background, I think our results demonstrated to us our resilience and our power of diversity. And so I'm not unhappy with the circumstances. 

Given that context as a long term player -- and you always hear us focus on the long term --  I genuinely, you know, try to ignore one year in a row. I pay a lot of attention to 3, 5 and 10 years in a row, and our 5-year average has been 7.7%t. I watched that one carefully, because we, you know, I came, I came here in 2020, our our 10 year return is 7.1%  and (over this period) we returned over $74 billion to the plan to to go straight to our funded status. Our 2-year average is 7.2% and I look at our funded status, we've come a long way from being low 8% funded 20 years ago to 99% this year, and and counting. And so we we even improved our funded status this year, which is positive, after making some significant changes to our liabilities, about a $2.2 billion more conservative liability adjustment. And so I'm, I'm hopeful that in a year or so, we will properly celebrate 100% funded status. 

And that's how we're measured. That's how we're judged. We look at our liabilities, we look at our direction of travel. And when we get 5% real, which translates into the seven plus that we've had for, you know, five and 10 years, when I looked at 2030 we'll have a significant push in over 100% funded status, and will have left OMERS in a much, much healthier state than how we found it not so long ago.

Six out of our seven asset classes were in the black. Our (public) equities team performed well, our credit team performed well, our Infra team performed well, our real estate business, and you've asked me this every year, has turned the corner. 

Our big difficulty, as you can see last year, was PE, and that is a symptom of many, many of the PE companies that you cover in a global context, the bid ask spreads were wide, the cost of money is still quite high. It's been an unpredictable environment for them to to invest in and aggregate and so no excuses. It's the work in progress for us, it is the one that was most painful for us to endure in 2025.

He went on to add:

The other notable for us is our plan benchmark was 7.5% this year. When we set those benchmarks, their currency agnostic, if we, if the US and Canadian currency had stayed flat, we would have been closer to 8%. 

We ended up with an protecting about 70 basis points or hedging strategies, but it still cost us 130 basis points, because we certainly aren't going back to a period where we edge 100% and so when I look at our operating plan, did people do what they were supposed to do? They did. Did currency have an impact that has been that prevented us from meeting that plan? 100%. And those things come and go from one year to the next. I'm not saying we can take it one year and blame it the next. Nonetheless, it was particularly difficult year to understand the direction of travel, given what what trends translated from the US and the US policies.

A couple more ideas. We remain 55% committed to the United States. We still believe, you know, they're 26% of the global GDP, their fiscal and monetary stimulus at this point in history is going to ensure that, at least for the foreseeable future, their markets are strong for most of the assets we invest in. Over time that exceptionalism may wane for all the reasons that we know, but for the short term, you know, we remain committed to lots of assets, lots of counterparties in that market, and we've got deep friendships there. Notwithstanding, when people read the headlines, they're Americans, are great friends, are great friends, and our great partners. 

But we want to do more in Canada. And we have, as you know, a significant portfolio here, sometimes with partners. But you know, Banff Springs, Shadow Lake Louise, Jasper Park Lodge, Shadow Whistler, you know, Yorkdale Shopping Center, Square One, Scarborough Town Center, 20% of the office market A class product in Vancouver, Calgary, Toronto. Bruce Powerr, the largest nuclear plant on the planet, 31% of the power supply for Ontario. Ontario land registry, city. System here, a little piece of the MLSE, as you know, you know, some really good PE businesses, some really good ventures investments. 

So we are, we're really committed to Canada, but we want to do more. And we're, we're encouraged when we look particularly at our infrastructure and and real estate, books and pipelines, that there's a lot of the offer there that we hope to get, get over the top, because we like the rule of law. We believe in this country.  

We believe in the future this country. We like a lot of the signs we're seeing as as you know, with this new government and the direction of travel with proper economic seeds getting planted for the first time in a long time. So I hope you'll read more in the future Leo that we're doing more in Canada. We're certainly seeing the prospects, and we're certainly committed to it. And maybe I stop there. 

I noted that most of the Maple 8 funds lost money on currency last year because they don't fully hedge or partially hedge and that's no big deal over the long run but sometimes in a pivotal year like 2025, it can cost you serious basis points.

Still, I'm a firm believer in US markets and the greenback over the long run so I don't put too much weight on a year like 2025 where the greenback slid for all sorts of reasons. 

I told Blake and Jonathan the only concern I had with OMERS results last year was what happened in private equity, was the -2.5% loss concentrated in one or two assets? What's Alexander Fraser (global head of PE) doing right now? Because everyone I'm seeing is shying away from purely direct investments where they own a controlling stake to invest and co-invest with top funds  because competition is ferocious and they need to maintain allocation and reduce fee drag.

Blake responded:

It's hard to turn a freighter on a dime. And our process in looking at our PE business started really a year and a half ago, where we said, let's look at the business plan, what am I great at, how do I get in the way of a trend given limited resources? And we still feel we can stand up and compete heavily in Canada, the United States, in the spaces that we've defined as areas of expertise in PE and we were very clear that in Europe, we didn't feel that we we had a team that could compete at the same level. 

We have a direction of travel to dispose of those assets, not in any fire sale way -- as you know, our balance sheet strong enough we never have to --  but over time, as it makes sense, and the money we liberate there goes back into funds, or fund like structures or co-invest structures. And so that takes time, and in the US, what we just found was that, you know, from a valuation perspective, there are very few data points, because the bid ask spreads so far that the market is softened. The things that did get traded, traded at lower multiples, and with the uncertainty that's being created from policy and tariff threats that we've all seen, it had an impact on values.

And to be perfectly honest, we have some really great asset, we have some good assets and we have some not so good assets in the in the 25 that we hold. And so, like any time in my life, the great assets hold their value, and the not so good ones, ultimately, the market catches up to them. So, some of that's gone through the river with us. 

So with Alexander, he's he is a bright guy. He's leading, getting his arms around it. We did take some writedowns. It wasn't, it wasn't one or two big ones. It was more incremental adjustments to try to get our portfolio to meet more with the market comps and environment that we're experiencing, and this is going to be a two or three year build for us. It's not it's not going to happen overnight. We will do more co-investment, we will do more funds, but we also have staged a team that in the verticals we're good at, we think we can compete very directly and competitively in North America. 

I asked Blake if they are accepting third-party assets in that asset class and he told me they only accept in infrastructure and real estate (where they have a lot... "Oxford has $40 billion in third party capital and Infra has some co-investment relationships").

I moved on to real estate noting Eric Pliesman has rejoined Oxford from HOOPP to be the CEO and President. i also noted even though commecial real estate delinquencies have risen in the US, REITs are on fire this year, Blackstone's Jon Gray is positive on the asset class, and it looks like things are looking up again.

Blake replied:

You know the story. I mean, Oxford averaged 12.5% returns for over 10 years from 2010, to 2020, we built a business there. There was a $17 billion domestic company, 7 billion of equity, 7 billion of debt, three of third party, and turned it into a now $85 billion business. 

It was primarily Canada. Now it's, you know, it's about 30% Canada, and it was primarily office and retail, and now it's got great diversification between retail and office and industrial and multifamily and hotels and credits. 

So I've always believed that Oxford is is one of the greater, one of the top five real estate businesses in the world, frankly And Covid hit, and we stepped in some bear traps during that period as a platform. 

The bear traps are behind us. The team's been changed. The go forward economics are favourable. Cap rates have stabilized, are coming down. The cost of money stabilized, coming down. And like any of these markets, I alluded to it a bit with private equity. I look at it as a K, and the top end of that K for great assets, their trajectory is so favourable, and the bottom end of that K for lower quality assets, it's not so favourable. It's going the wrong way. 

And the vast, vast majority of our book and Oxford is favourable. I think it has turned the corner. Real estate's become an 8% or 9% business, not a 12.5% business, for the foreseeable future. And you know this being in the black is an indication of what I've seen coming with the changes that Dan Fournier made over the last three years, where we had him there, we can see it turning the corner. 

We've taken our writedowns. We've got a great strategy and a great team back in place. So it took, it took us a few years to turn it and I it won't happen overnight, Leo, but this business is is on its way back, and it's going to remain a significant contributor to OMERS for the future. 

In Infrastructure, I noted what happened at Thames Water and said "I hate writing about Thames Water" but had to cover it. I asked them if they took the writedown there back in 2024 and how that portfolio is doing.

 Blake responded:

OMERS Infrastructure is $30 billion, 22% of our assets. Like Oxford, it's a it's an extraordinary business that we've we've built up for over 30 years, close to 40 years. And so, you know, I would put our team against any in the world to compete. We will, you know, when you have 30 children, and I tell this story often, Leo, Jonathan's laughing. I grew up on a street in my hometown where a family is...

LOL! I stopped him right there as I heard that stories at least five times (when you have a family of 10, one or two kids are superstars, 6 are average, 2 or 3 a problem makers).

Blake continued:

You are always going to have some of those good ones and not so good ones. So Thames Water was a good example. We're fighting through a couple others right now that that will be, you know, we are deeply focused on that are going to be, you know, we really got to nurse them through a difficult period and, and when you have a couple of those, and you know, if, 10% of your book is is causing a grief, that's probably the average.

Jonathan interjected: " And we have some great ones that no one wants to write stories about."

Blake added: "And many spectacular ones that there's no problem bragging about because no one wants to write about it." 

I said it reminds me of what my uncle, a devout Christian, once told me long ago: "You only read about pedophile priests in the news. The media never covers the thousands of priests all over world doing God's great work, helping the poor and disenfranchised, their sacrifices are largely ignored." 

Blake went on:

The delicacy with infrastructure is it also relies on consistent counterparties. both contracts and people's word, you know, and Thames Water, to be perfectly honest, was a regulator who didn't stand up to its obligations and and that's very difficult in the western democratic society. When that happens to you, and concessions in general require people's word meaning something. So it's a more delicate world today than what we grew up with. Having said that our word means something, our handshake means something, our portfolio has been built on these relationships. We continue to believe in infrastructure as a fitness and and we want to do more in this country.

On that point, I shared with Blake that I'm generally supportive of Mark Carney's government but I'm growing increasingly impatient on big projects and wondering when are they going to get the ball rolling in a meaningful way to privatize airports and other infrastructure assets. 

I asked Blake if there's anything he can share on the record and he replied:

I can say publicly, Leo that for the first time in many years, we are seeing genuine interest from both provincial and federal governments to finally move some things forward and I'm optimistic that that will take place. To your point, the proof will be in the pudding. And to your point, sooner is better than later, but I do remain optimistic and we're all having those conversations at a level that we haven't experienced in a long time. All right, so stay tuned. Okay.

Glad to hear this, it needs to get done sooner rather than later.

Next, I asked Jonathan what is going on in private credit where I noted events surrounding Blue Owl Capital and some people like John Graham warning that underwriting standards have become fast and loose in some corners of the private credit market. 

Jonathan replied:

Well, I'm not worried about OMERS. And the reason why I'm not worried about OMERS is our strategy is to hold the pen on every credit we underwrite ourselves, and not to invest through funds where others have control of that for us. That means that we apply our own underwriting standards. We do deal with some relationships with third parties who bring us transactions to look at, we evaluate them all ourselves, and we underwrite them to our standards. And so what I can tell you about our book is I'm very pleased with the quality that I see. We're pleased with the performance that we've had. We've been nudging up our allocations of capital into that book. But we do see issues out there in the market that, frankly, are impacting our book, but which are impacting others. And so, like you, we're reading and we're hearing about that, but I'm not worried for OMERS.

Blake added:

We really are disciplined about not adding a blank check within some four corners of an agreement, but rather doing our own due diligence and underwriting on every loan of substance and so far Leo, our delinquency and default record is is superior. And that really is encouraging. 

I ended by noting this:

I know you guys keep getting criticized about not investing enough in Canada, but we covered all that, those angles as well. I foresee you and rest of Maple 8 are going to get criticized for not beating the S&P 500 pr S&P TSX. And your response would be, we're not there to beat the S&P every year, we're there to meet the liabilities of our pensioners. Is that correct?  

Blake responded:

Thank you. And our plan, which you've also heard me say multiple times, is 1,2,3,4,5. Between now and 2030, our ambition is to be 100% plus a cushion funded. Our $150 billion, roughly, will be $200 billion of equity. Three stands for three continents, very prescriptive strategies. If we can't be great at something, we don't go there. Four for $400 billion plus of AUM. We are moving fast approaching half a trillion dollar enterprise between now and 2030. And to your final point, five stands for a 5% real which we've been able to deliver for five and 10 years, respectively. And when you look through and go back to the first objective, we will be significant. We will have a significant cushion in our funded status by delivering a 5% real, and we're measured by bridging that gap and giving our pensioners some optionality and a big cushion, not by some other metrics or some other, you know, abstract number that doesn't pertain to our known liabilities. So that's the that's the message.

Great way to end our discussion. 

Once again, I thank Blake and Jonathan for a great discussion and Don for setting it all up.

Below, worry in the private credit market continued Monday after Blue Owl last week permanently closed one of its tech-focused funds — preventing investors from withdrawing their cash every three months as they’d previously been allowed. The firm began selling assets to return investor capital. 

It’s the latest sign of tumult in a $1.8 trillion market stricken with worry about overspending on artificial intelligence, the technology’s disruptive power and lending standards more broadly. And it’s evoking comparisons to the run-up to the 2008 financial crisis. Bloomberg News Senior Editor for Credit James Crombie joins Bloomberg Businessweek Daily to discuss. He speaks with Carol Massar and Emily Graffeo.