Embracing opportunities in the pension plan investment arena with agility, flexibility and the right partnerships
By Ed McCarthy
With over C$365 billion in assets and more than 6 million Quebecers contributing or receiving benefits as of December 2020, Caisse de dépôt et placement du Québec (CDPQ) is a major force in the Canadian pension market. We profile two CDPQ-subsidiary executives: Rana Ghorayeb, president and chief executive officer of Otéra Capital, and Nathalie Palladitcheff, president and chief executive Officer of Ivanhoé Cambridge. Both women are members of CDPQ’s Executive Committee.
CAiP Forum: How did you get started in pension plan investment management? And what led you to your current position with CDPQ in real estate investing?
Rana Ghorayeb
Rana Ghorayeb: I started my career in investments at TIAA-CREF, the largest pension fund in the United States, as a real estate acquisition associate, just after completing my master’s degree in finance at New York University. After New York, in 2007, I took a position as an investment manager at JP Morgan in London where I was responsible for real estate acquisitions in various European markets. In 2012, CDPQ invited me to head their transaction team in infrastructure and eventually lead the transaction and asset management teams. In less than ten years, we grew the portfolio to more than C$23 billion in assets under management. In 2019 I took over the reins of Otéra Capital, the real estate lending arm of CDPQ, which manages a portfolio of C$23.1 billion.
Nathalie Palladitcheff: I’ve been navigating for more than 20 years in international commercial real estate. Before my appointment as CEO, I held several positions at Ivanhoé Cambridge including Executive Vice President and Chief Financial Officer. In that capacity, I was responsible for development and execution of the company’s overall strategy and it naturally brought me to where I am today, building on a diversified background.
CF: What are some of the current challenges you’re encountering in real estate debt and real estate portfolio management?
Ghorayeb: We are quite satisfied with the performance of our real estate debt portfolio. Nevertheless, one of our current challenges is balancing resources between sourcing and asset management. We also manage a high volume of transactions in a very competitive market environment, which leaves us with a very small margin of error and requires us to be innovative and agile.
Palladitcheff: Diversity and diversification are key to managing a global portfolio like ours. Our success in going global is partly due to having offices in North America, Europe, Asia, and Latin America. Our teams have deep local experience and networks in these key markets; they contribute that knowledge and are actively involved when we set and review our strategies.
Choosing solid partners who understand and master the conditions of their markets is an ongoing challenge, as it’s the key to meeting local needs with top-quality projects. Throughout our logistics and residential latest investments, we’ve managed to create partnerships who complement our strengths.
CF: Did the pandemic affect your investment strategy, and do you foresee any longer-term impacts?
Ghorayeb: The pandemic acted as a catalyzer for certain trends that we were already aware of. Undoubtedly, the pandemic affected our strategy by accelerating our response both on the short-term but also for the long-term. We continue to lend to players that have the vision, the know-how, and the ability to adapt to this changing landscape.
Nathalie Palladitcheff
Palladitcheff: Every crisis gives you the opportunity to reinvent yourself, and the current pandemic is no exception. COVID-19 has accelerated the execution of our strategic plan, which already included the trends brought forward by the crisis. However, real estate is a sector favourably positioned for the long term. Urbanization and demand for space will continue, as we spend more than 90% of our time indoors and more than 68% of the world’s population will live in an urban environment in 2050 versus 55% today. We believe flexibility of use will be key, as user needs evolve, in all asset classes.
CF: From your perspective, how do you see pension plan real estate investing evolving over the next five to 10 years?
Ghorayeb: Real estate is a legitimized asset class and is a beneficial diversifier for pension fund portfolios. In fact, it matches the long-term liabilities of the pension fund, it offers long-term cash flow predictability, offers a hedge against inflation, and it is less volatile than public markets.
Palladitcheff: For pension plan real estate investors like us, the coming year will be all about embracing opportunities to create resiliency, while shifting strategies to anticipate and stay ahead of emerging and accelerating trends. In the next few years, I think most institutional capital and most lenders will be focusing on two asset classes, residential and logistics. As for the two slightly more traditional asset classes of offices and retail, which are experiencing some disruption, investors are going to be a little more cautious about the size of their portfolios relative to the others. Balance and agility will continue to be key. At Ivanhoé Capital, our priorities will remain the same: to deliver performance for our investors and depositors while having a sustainable impact where we invest; to that end, we will boost innovation, intensify our CSR (Corporate Social Responsibility) strategy, accelerate the decarbonization of our portfolio, and keep learning.
Be sure to attend The CAiP Alternative Investments Forum, an in-person event September 21-23, 2021, in Montebello, Q.C., where leading experts and top pension fund managers from across Canada will offer insights into new opportunities and risks in the alternatives market, including the role of ESG.
Ed McCarthy is a longtime financial writer and author of three books, including “Foundations of Computational Finance with MATLAB.”
