The Canadian Press reports CPP Investments sells portfolio of private equity fund interests:

TORONTO — The Canada Pension Plan Investment Board says it has sold a portfolio of 25 private equity fund interests in North American and European buyout funds for $1.2 billion in net proceeds.

The board says the buyers are Ares Management Private Equity Secondaries funds and CVC Secondary Partners, the secondaries business of CVC.

Ares is a global alternative investment manager, while CVC is a global private markets manager focused on private equity, secondaries, credit and infrastructure.

The portfolio sold included primary commitments and secondary purchases made by CPP Investments in funds over 10 years old.

Dushy Sivanithy, CPP Investment’s head of secondaries, says the deal was part of its active portfolio management.

CPP Investments’ net assets totalled $699.6 billion at Dec. 31, 2024. 

CPP Investments recently issued a press release on this transaction:

London, U.K. (April 17, 2025) – Canada Pension Plan Investment Board (CPP Investments) today announced it has completed the sale of a diversified portfolio of 25 limited partnership fund interests in North American and European buyout funds to Ares Management Private Equity Secondaries funds (Ares) and CVC Secondary Partners, the Secondaries business of CVC.

Ares is a leading global alternative investment manager offering primary and secondary investment solutions across asset classes with over US$525 billion of assets under management, and CVC is a leading global private markets manager focused on private equity, secondaries, credit and infrastructure with €200 billion of assets under management.

CPP Investments’ net proceeds from the transaction, after certain costs and adjustments, were approximately C$1.2 billion. The transaction completed on 31st March 2025.

“This transaction was undertaken as part of our active portfolio management activities. As a systematic buyer and seller in the secondaries market, we see this sale as an attractive opportunity to optimize the construction of our portfolio,” said Dushy Sivanithy, Managing Director & Head of Secondaries, CPP Investments. “Ongoing management of our private equity commitments continues to realize strong returns for the CPP Fund.”

The portfolio of interests represents various primary commitments and secondary purchases made by CPP Investments in funds over 10 years old.

CPP Investments’ net investments in private equity totalled C$151.2 billion at December 31, 2024. The portfolio is invested in a wide range of private equity assets globally, focusing on long-term value creation through commitments to funds, secondary markets and direct investments in private companies.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 22 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Mumbai, New York City, San Francisco, 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, 2024, the Fund totalled C$699.6 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or on X @CPPInvestments.

So what's this all about? Why is CPP Investments, one of the largest allocators in private equity, selling stakes in private equity funds?

Dushy Sivanithy, Managing Director & Head of Secondaries at CPP Investments (featured above) states the following:

“This transaction was undertaken as part of our active portfolio management activities. As a systematic buyer and seller in the secondaries market, we see this sale as an attractive opportunity to optimize the construction of our portfolio. Ongoing management of our private equity commitments continues to realize strong returns for the CPP Fund.” 

What does he mean by active portfolio management? These aren't liquid stocks which you can trade in and out of, these are illiquid stakes in private equity funds that invest in private companies.

True but this is where the burgeoning secondaries market in private equity comes into play.

Back in 2004 when I was helping Derek Murphy set up private equity as an asset class at PSP Investments, the secondaries market in private equity was nowhere near as large and liquid as it is nowadays.

And when you sold stakes back then, it was because you were desperate and sold at deep discounts (10-20%).

Fast forward to 2025, a huge investor like CPP Investments calls top private equity funds like Ares and CVC to unload some over $1 billion in fund stakes and this deal can get done in a few weeks and at a very reasonable discount (typically 5%).

But why is CPP Investments selling old fund stakes in private equity?

There are many reasons but my best guess is they are shoring up liquidity and diversifying vintage year risk.

In order to properly manage a huge C$151.2 billion private equity portfolio where funds make up 40% to 50%  and rest is co-investments, directs and secondaries, you really need to manage your liquidity and properly diversify your vintage year risk.

If you do not properly diversify vintage year risk, you can get killed on a bad year and good luck making up the shortfall.

Also worth noting that CPP Investments isn't the only large Canadian pension investment manager selling PE stakes.

Late last year, PSP and OTPP sold $1 billion plus in PE stakes.

I noted this when I wrote that comment:

Go back to read my comments on BCI's Jim Pittman on staying focused, liquid and agile in private equity and it selling $1 billion of PE holdings to Ardian as well as my comments on CDPQ's head of PE on vintage year diversification and managing liquidity and how it used secondaries market to address overallocation.

Jim Pittman, Martin Longchamps and the heads of private equity across Canada's large pension funds have been quietly selling underperfoming stakes at a small discount to free up monies to invest in better opportunities going forward.

The reason they are able to do this is because the secondaries market has matured and is widely used now to manage portfolio liquidity.

And it's been a tough couple of years in private equity and everyone is feeling the pinch.

These are tough time sin private equity, exits are challenging, rates remain stubbornly high, costs are going up, and so on and so on.

It's still a great asset class but now more than ever, you better get the approach right by investing with top strategic partners and co-investing alongside them to reduce fee drag and really lean into them to leverage your size to get the best terms.

Canada's large pension investment managers are cutting back on purely direct investments and doing exactly that.

There's not much of a choice, you either do that or risk severe underpeformance in one of the most important asset classes to capture long-term returns.

So, trust Dushy Sivanithy, he's a smart guy, has tons of great experience having worked at Rede Partners, CDC Group and Pantheon before joining CPP Investments.

Earlier this year, he was named one of Private Equity News' most influential figures in secondaries:

Very talented guy who is also working for a more inclusive and diverse private equity landscape.

Alright, let me end it there, just remember this, the secondaries market is now huge and a lot more liquid, and top PE firms like Ares and CVC are great partners to have to unload fund stakes at a reasonable discount when these large allocators are diversifying vintage year risk.

Below, Cari Lodge, head of secondaries at CF Private Equity joins the Private Equity podcasts to discuss the astronomical growth in the secondaries market. 

Great discussion, listen to her insights."Being in the secondaries business, we see a lot of funds and we see a lot of what goes wrong in the private equity market that makes people want to sell things. One of the most common mistakes PE firms make is holding on to assets too long. If you look at the average holding period in the private equity market, it's gone from 5.7 years to 6.7 years. The secondary market exists because people want liquidity and we see it all the time."

Also, private credit secondaries has the potential to surpass private equity in deal volume over the longer term as more secondaries investors pursue yield and diversification amid market volatility.

Over the past year, several billion-dollar-plus deals have emerged in the credit secondaries space, including Coller Capital's recent acquisition of a $1.6 billion portfolio from American National and TPG Angelo Gordon's $1.5 billion continuation fund. Firms like Coller, Pantheon, Apollo Global Management and Ares Management have also launched dedicated credit secondaries strategies..

In this episode, Michael Schad, head of secondaries at Coller Capital, and Gerald Cooper, global co-head of secondaries advisory at Campbell Lutyens, speak with Americas Correspondent Hannah Zhang about the evolution of the private credit secondaries market and where the next opportunities may emerge.

"Most of the asset managers are sitting on tens of billions of NAV. So it lends itself to a secondary opportunity that is inevitably going to continue to grow and be of scale," Cooper said in the podcast. "I think as we look five to 10 years down the road, we are hopeful that we are going to see more specialised pockets of capital come into the space."

This too is a fantastic discussion and I agree, the private credit secondaries market will eventually eclipse the private equity secondaries market and this market is evolving very quickly. 

Listen carefully to both podcasts. I can assure you CPP Investments is a huge investor in both markets.

This Monday marked Workers Memorial Day, an annual international day of remembrance of workers who have died on the job, as well as a day of action to continue the fight for workplace safety. An estimated 140,587 U.S. workers died from hazardous working conditions in 2023, according to a new AFL-CIO report. This amounts to roughly 385 workplace-related deaths a day. While mourning these lives lost, there is also reason to fear this death toll will only rise due to aggressive Trump administration attacks on basic health and safety protections long taken for granted in most U.S. workplaces.

Trump has spent his first 100 days in office waging a war against workers, firing tens of thousands of federal workers, and slashing the wages of hundreds of thousands of workers on federal contracts. He has also issued dozens of executive orders to roll back or review existing regulations, including an order directing agencies—including the Occupational Health and Safety Administration (OSHA)—to eliminate 10 existing protections before enacting any new guidelines.

Above all, Trump has empowered Elon Musk—a billionaire whose own companies are under investigation for dozens of serious health and safety violations—to destroy and disable already understaffed federal agencies that prevent workplace deaths and injuries. The administration’s damaging actions include:

• effectively eliminating the National Institute for Occupational Safety and Health (NIOSH), the sole agency responsible for research that informs OSHA policymaking with evidence-based assessments of injury and fatality risks and actionable guidance for employers to use to improve safety;
• closing down 11 OSHA offices in states with the highest workplace fatality rates;
• eliminating 34 offices of the Mine Safety and Health Administration (MSHA), which protects coal miners from hazards like black lung disease;
• pausing a new rule on silica exposure to prevent coal miner disease and death from silicosis;
• allowing Musk to access sensitive OSHA data that could compromise ongoing investigations of alleged violations (including analysis of hazards that caused fatalities) and increase the risk of retaliation against injured workers and whistleblowers.

OSHA saves thousands of lives each year but is now at risk

This Workers Memorial Day marked the 54th anniversary of the Occupational Safety and Health (OSH) Act taking effect, enshrining into law the basic guarantee that workplaces should be “free from recognized hazards that could cause death or serious physical harm to employees.” OSHA’s existence has since become fundamental to the health and safety of workers across the country.

Since its passage, the OSH Act has saved the lives of more than 712,000 workers and reduced jobsite deaths by almost two-thirds, even as the size of the U.S. workforce has more than doubled.

Even after these decades of progress, far too many workers remain at serious risk of injury, illness, or death today. In addition to the traumatic injuries and occupational diseases that kill approximately 140,000 workers each year, between 5.2 million to 7.8 million workers suffer work-related injuries and illnesses each year. Trump’s moves to eliminate NIOSH while hobbling OSHA and MSHA enforcement capacity will make work even less safe and unavoidably increase these fatality, injury, and illness rates.

Data also make clear that weakening workplace safety standards and enforcement will disproportionately put older workers, workers of color, and immigrant workers at risk: More than 33% of 2023 workplace fatalities occurred among workers aged 55 and older, and 67% of those killed on the job were immigrants. Black and Latino workers are more likely to die on the job, with Latino workers having the highest workplace fatality rate.

Trump is threatening recent progress toward long-overdue standards to prevent deaths from silicosis and extreme heat

In many cases, strengthening OSHA standards could prevent deaths and injuries, but Trump is also blocking implementation or rulemaking on long-sought new standards. Earlier this month, MSHA announced it would pause enforcement of a new silica rule that would have halved allowable levels of exposure to silica dust—an extremely toxic dust that is a major cause of deadly black lung disease among coal miners. The Department of Labor had estimated the new rule would result in nearly 1,100 fewer deaths and 3,750 fewer cases of silica-related illnesses.

The Trump administration is also expected to block a critical new OSHA standard on extreme heat exposure. Last August, following years of worker advocacy and NIOSH research, OSHA proposed a federal heat standard that would ensure both indoor and outdoor workers had access to paid rest breaks, cool water, and time to acclimate to extreme temperatures. This regulation would have protected an estimated 36 million workers and prevented thousands of heat-related injuries and illnesses a year.

If enacted sooner, a federal heat standard might have saved some of the workers who died from extreme heat exposure in 2023, like Salvador Garcia Espitia, a 26-year-old who died during his first day on the job as a temporary farm worker in Belle Glade, Florida. Garcia passed out after laboring for hours in nearly 90-degree heat and never woke up. Garcia’s story is, unfortunately, one of many: A Tampa Bay Times investigation found that over half of heat-related deaths in the state go unreported. Without a federal heat standard, stories like Garcia’s will only become more common as climate change accelerates.

While states have the option to adopt their own heat standards, far too few states have done so. Further underscoring the acute need for a federal standard to cover workers across the country, two of the hottest states in the country—Texas and Florida—have failed to enact state heat standards, and they have even taken the extra step of blocking localities from adopting heat standards.

Trump’s attacks make it urgent for states to strengthen OSHA standards and enforcement

Even prior to new Trump attacks on OSHA, chronic underfunding and understaffing had long limited the agency’s ability to fully enforce the law. Though the Biden administration expanded enforcement efforts, OSHA still employs fewer than 2,000 inspectors to cover a workforce of 161 million workers. This limited staffing means that it would take 185 years for OSHA to inspect every U.S. workplace. Even more so than they did under the first Trump administration, OSHA enforcement rates will likely decline dramatically given office closures and staff cuts.

States have important responsibilities to act in the face of threats to federal OSHA and its enforcement. The OSH Act established the option for states to run their own OSHA programs—as long as they are “at least as effective” as federal OSHA—and 21 states currently operate their own plans. An additional six states maintain OSHA plans covering state and local government employees (who are not otherwise covered by federal OSHA). Some states such as California and Minnesota have gone above the federal floor, adding important additional standards on heat exposure and other hazards. On the other hand, too many state OSHA plans have failed to adopt required new federal standards or to allocate adequate resources to enforcement, leaving worker complaints neglected. All states with their own state plans have room to improve enforcement capacity, and more states have opportunities to pursue strong standards on serious hazards that federal OSHA has not yet addressed, including extreme heat exposure.

In short, Trump’s dismantling of NIOSH, closure of OSHA and MSHA field offices, and pausing of critical new silica and heat standards are all blatant attacks on workers that will result in thousands of preventable deaths, injuries, and illnesses. As Trump’s attacks escalate a growing national workers’ rights crisis, states must take action to shore up their own worker health and safety protections wherever possible, and Congress must step in and heed the calls of unions, affected workers, and advocates calling for the restoration of NIOSH and OSHA capacities.

Republicans in Congress and the Trump administration passed a budget blueprint to pay for tax cuts that overwhelmingly favor rich households at the expense of working people. Communities of color will be disproportionately impacted by these potential cuts. In addition to targeting Medicaid—we highlighted how Medicaid cuts would be especially harmful for people of color and children here—the budget resolution also tees up Congress to slash $230 billion in agricultural spending over the next 10 years. Finding cuts that large will almost certainly require reducing nutrition spending by cutting the country’s largest food assistance program, the Supplemental Nutrition Assistance Program (SNAP), which is run out of the U.S. Department of Agriculture (USDA).

These draconian cuts, along with the troubling momentum to add even more stringent work requirements to benefits like SNAP and Medicaid, will leave economically vulnerable families who depend on these support systems exposed to even more hardship during a time of unprecedented economic mismanagement, chaos, and uncertainty.

SNAP supplements low-income families’ grocery budget to help them access essential and healthy foods. In December 2024, SNAP had more than 42 million participants, with an average monthly benefit per person of approximately $189. Nearly eight in 10 (79%) households participating in SNAP include at least one member who is a child, an elderly adult, or a person with a disability. SNAP benefits help these families avoid hunger and falling deeper into economic insecurity and poverty.  

Cuts to SNAP will disproportionately harm families of color

More than 22 million households participated in SNAP by the end of last year. In between 2019 and 2023, more than one in 10 (11.8%) households participated in the program. While many of these families (43.1%) are non-Hispanic white,1 families of color are more likely to rely on SNAP benefits to supplement their food budget (see Figure A). More than one in five Black, American Indian and Alaska Native (AIAN), and Native Hawaiian and Other Pacific Islander (NHPI) households relied on SNAP to meet their nutritional needs in the 2019–2023 period. These families, along with Hispanic households, are more than twice as likely to participate in SNAP than their non-Hispanic white peers, leaving them particularly vulnerable to SNAP benefits cuts or unhelpful work requirements that make it harder to receive or keep this important source of support.  

Figure A SNAP benefits keep millions of children and people of color out of poverty each year

The country’s largest nutritional assistance program does more than help families put food on the table. SNAP is one of the country’s most effective poverty alleviation programs. In 2023 alone, SNAP kept more than three million people out of poverty, among which nearly two in five (39.3%) were children.

The poverty reduction success of SNAP also helps bridge racial and ethnic disparities. More than two-thirds of the individuals that SNAP helped lift out of poverty in 2023 were people of color (see Figure B below). More than two million people of color, including over 800,000 Black and over 900,000 Hispanic people, avoided poverty thanks to the support provided by SNAP.  

Figure B

In addition to helping low-income families cover their grocery bills, SNAP helps connect families with other sources of support. For example, SNAP helps families and children in need qualify for additional support via the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and the National School Lunch Program (NSLP). While WIC supports pregnant women, infants, and children under the age of five who face nutritional risks, NSLP provides reduced-cost or free lunches to low-income children in public and non-profit private schools.

As in the case of SNAP, the support of both WIC and NSLP extends beyond nutritional assistance. Both programs combined helped lift more than one million people out of poverty in 2023, with people of color accounting for more than three-quarters (77.3%) of these individuals. Republican attacks on the USDA budget will restrict access to these life-saving resources at home and in school.

Families and children of color need expanded SNAP benefits—not cuts—to avoid rising food insecurity

Republicans in Congress and the Trump administration are looking to slash spending on nutritional assistance and to restrict access to benefits despite rising food insecurity since 2021. In 2023, the latest year for which estimates are available, 18 million households (13.5%) were unable to afford enough food to meet the needs of all their members at some point that year. This latest figure is higher than the 10.0% of families that experienced similar hardship in 2021. Hidden in these overall statistics is the disproportionate impact of food insecurity borne by families of color.

In 2023, more than one in five Black (23.3%) and Hispanic (21.9%) households experienced food insecurity (see Figure C). These families were twice as likely as their non-Hispanic white peers (9.9%) to experience food insecurity that year. Food insecurity reached a low point for Black and Hispanic households in 2019, but these families have struggled to hold on to the periods of progress since 2001, given the impact of the Great Recession, the COVID-19 pandemic, and the rising food prices caused by the pandemic. Figure C

We see similar outcomes for the subset of households with children. While households of color with children have experienced a significant reduction in food insecurity since the height of the Great Recession, much of this progress has eroded. For Hispanic households with children, the prevalence of food insecurity has nearly doubled, rising from the low of 7.8% in 2019 to 14.0% in 2023 (see Figure D). While the rise in food insecurity has been a little more muted for Black households with children since 2015, both Black and Hispanic households with children remained more than twice as likely to experience food insecurity as their non-Hispanic peers in 2023.

Figure D Even more families will need SNAP because of Trump’s economic mismanagement

It is clear that SNAP and other nutritional assistance programs under the USDA help families and children avoid poverty and food insecurity. SNAP benefits, for example, reduce the likelihood of being food insecure by about 30%. The positive link between improved food security and SNAP applies across different types of households, including those with children. SNAP is also particularly responsive to changing economic conditions. Because SNAP benefits are means-tested, the program supports even more individuals and households in need during economic downturns; an increase in the unemployment rate of 1 percentage point, for example, is associated with an additional two to three million additional participants in the program.

Because SNAP spending rises as private activity slows during recessions, the program is a particularly effective “automatic stabilizer,” keeping recessions shorter and less severe than they would otherwise be. Each additional dollar in SNAP benefits disbursed during periods of overall economic slack, for example, increases overall spending in the economy by $1.54. During an economic contraction, every $1 billion spent on SNAP generates more than 10,000 jobs.

If Republicans in Congress and President Trump were serious about lifting millions of people out of poverty, helping people address the cost of living and reduce food insecurity, and helping our economy rebound from crises, they would strengthen SNAP and other social safety net programs—not gut them. Cutting SNAP benefits or tightening the rules to discourage more people from accessing them will only expose more families to food insecurity. These concerns are especially relevant as the prospects of slower economic growth and higher food prices rise in the face of chaotic and harmful policies ushered by the Trump administration. The social safety net offered by programs like SNAP is essential to mitigating the economic pain that looms ahead.

1. White households account for 43.1% of SNAP participating households. The share of white families participating in SNAP relative to the population of white families in the United States is 7.9%, as shown in Figure A.

Layan Odeh and Paula Sambo of Bloomberg News report Omers’ Eric Haley retires in latest change within private equity:

The head of buyouts at Ontario’s pension fund for local government workers, Eric Haley, will retire and leave the firm at the end of the year in the latest change to the plan’s private equity business.

Haley will continue to lead the North American buyout team until the end of 2025, Don Peat, spokesperson for the Ontario Municipal Employees Retirement System, said in an email. “We are deeply grateful to Eric for his commitment to delivering on the Omers pension promise and his significant contributions to our private equity business and team culture.”

Omers has been revamping its private equity unit under Ralph Berg, who became chief investment officer in 2023. Last year, the Toronto-based fund halted direct private equity investments in Europe and opted to shift its strategy by investing alongside partners and external managers. The pension also launched a global funds strategy within a new group called Private Capital.

The $27.5 billion (US$20 billion) private equity portfolio was split, with Michael Block leading the global funds strategy and Haley overseeing the North American buyout program, the firm said at the time. It’s unclear whether Omers will replace Haley.

Haley’s departure continues a period of employee change within Omers’ private equity business. In March, Alexander Fraser, a former partner of a Temasek-backed fund, joined as global head of its private equity arm. He succeeded Michael Graham, who retired in February. Jonathan Mussellwhite, who had led private equity in Europe since 2018, left a few months before that.

For decades, the so-called Maple Eight have built up their deal teams to take a leading role in some private equity transactions. Now, some of them want to lean more on partners, as higher borrowing costs choked deal activity and diminished the allure of controlling portfolio firms.

Last month, Ontario Teachers’ Pension Plan said it’s re-examining its buyout unit, aiming to work more with partners rather than owning large or controlling stakes in private businesses as it seeks to mitigate risk. And Caisse de Depot et Placement du Quebec said in February that it will scale back its direct investing and team up with third-party managers.

I'll keep my comments brief as it's Election Day in Canada and I want to see coverage as results start coming in.

I'm hoping for sweeping change coast-to-coast but the polls suggest another minority government is on its way (sigh!).

Speaking of sweeping change, OMERS is rejigging its private equity unit.

The change has accelerated since Ralph Berg took over as CIO in 2023.

Berg has recently refocused the investment programs and in Private Equity he decided fund investments was the best route for Europe and Asia and stuck to buyouts in North America with more co-investments:

Private equity is the final piece of the puzzle with investments dominated by the buyout program. In September last year, after analysing performance and deal flow, Berg decided to switch to fund investing in Asia and Europe and to focus on buyouts in North America.

“I came to the view based on data and performance we don’t have the scale to afford the quality origination and asset management required to efficiently do control deals in Asia or Europe,” he says. “We decided to focus on our buyout efforts in North America.” That group employs around 65 people across New York and Toronto.

The fund also recently formed a new external funds management group within private equity, called private capital headed by Michael Block. This is where the historical group of OMERS Ventures, which had some success in financing pharma in particular, and a legacy portfolio in green tech, will now be housed. Through this new group it will continue to invest in life sciences and venture capital and invest with external partners in funds and co-invest.

OMERS also recently hired Alexander Fraser, a former partner of a Temasek-backed 65 Equity Partners to run its private equity arm. 

Well, to be blunt the writing was on the wall for Eric Haley who was promoted in 2022 to head the North American direct buyout group. 

Clearly there is an important shift in strategy going on, less purely direct buyouts, more co-investments with large strategic partners.

It's going on all over, not just OMERS, and I wrote about it last week when I covered why Canadian pension funds are cutting back on pioneering PE investments.

In short, I don't care if you're OMERS, OTPP, CDPQ or whoever, you are not going to compete with the top private equity funds in the world so it makes more sense co-investing alongside them on larger transactions to reduce fee drag.

OMERS' CIO Ralph Berg hinted at this to the Financial Times when he said: “[we] evolved our investment strategy over the last couple of years to explore different models and use funds where it is complementary”. 

I suspect they'll be using more and more funds where it makes sense and start curtailing their purely direct deals, especially in Europe and Asia.

Even in North America, it's a challenging environment.

One thing is clear, however, Ralph Berg is running the show at OMERS when it comes to investments and he's very performance driven and expects results.

CEO Blake Hutcheson doesn't get involved in these investment decisions but he too expects results and wants to make sure all departments are producing what is expected of them. 

Alright, let me wrap it up there but before I forget a few items related to OMERS.

First, Anca Drexler, former Head of Total Portfolio Management there is now the new CIO of Building Ontario Fund:

I congratulate her and think she'll be a superb CIO at Building Ontario Fund.

And OMERS CFO & CSO Jonathan Simmons is back it again this year, walking to raise funds for MS research:  

Jonathan raised more than $500,000 last year in cumulative funds for his 25th anniversary and if you'd like to support him, please do so by clicking here.

I was diagnosed with MS back in June 1997 right in the middle of writing my Masters' thesis in Economics at McGill. 

Back then, I flew to New Jersey to meet Dr. Stuart Cook who wrote The Handbook of Multiple Sclerosis (my late aunt worked with him and arranged a meeting). 

At the time, there were only three drugs available to treat MS (Betaseron, Avonex and Rebif) and Dr. Cook convinced me to go on Avonex which lasted for eight years till I stopped using it because I saw no meaningful benefits.

Amazingly, the progress in research and new drugs over the last 28 years has been spectacular (especially for relapsing remitting MS, less so for progressive MS although there too there's progress). 

The good thing about MS is after many years, the disease stabilizes, there are a lot less or no inflammatory attacks but neurological deficits remain.

After almost 30 years, I can write my own handbook on MS but count myself lucky.

My biggest preoccupation these days is addressing my chronic SI joint pain which is debilitating and I am prepared to do radiofrequency nerve ablation which will cost me a pretty penny (there is no free healthcare in Canada, that's a myth).   

Anyways, I wish Jonathan all the best again this year, please feel free to donate here to help him raise his target funds.

Below, Blake Hutcheson, President and CEO of OMERS, recently addressed the Canadian Club Toronto for a discussion on today’s turbulent economic and political landscape.

Blake is a terrific speaker and I highly recommend you take the time to watch this.

Let me also wish him a happy belated birthday and wish him many more healthy years ahead.

I celebrated mine with my wife and 19-month toddler over the weekend but unlike Blake and my friends, I was jumping in and out of a playpen but did get to watch the Habs with some buddies last night eating pizza (too bad they lost).

As the Trump administration pursues a deeply chaotic policy agenda, key labor market data haven’t yet revealed strong signs of economic weakness, but other sources indicate growing recessionary pressures. Consumer expectations are more pessimistic about inflation and unemployment, manufacturing and construction activity are declining, the stock market has fallen and remains volatile, and GDP forecasts look grim. These “softer” measures could take time to reflect in the official jobs data, particularly at the national level. This week’s data releases—including the Job Openings and Labor Turnover Survey (JOLTS) tomorrow, unemployment insurance claims on Thursday, and the jobs report on Friday—should provide more clarity.

Soft indicators reveal economic weakness

By “soft” indicators, we primarily mean data sources that rely on consumer or business sentiment rather than outcomes. For example, a “soft” measure of consumer strength would be consumer sentiment surveys asking them about their confidence levels, but a “hard” measure of consumer strength would be their actual spending. Other “soft” measures include forecasts that make projections based on past historical relationships. So far, it is these soft indicators that have deteriorated noticeably while most hard indicators have not yet strongly signaled a recession.

The latest New York Federal Reserve survey shows that consumers have more pessimistic expectations about inflation, their households’ financial situation, and particularly unemployment: The probability that unemployment will be higher one year from now hit its highest expected level since the pandemic recession in 2020. The University of Michigan’s consumer confidence surveys also show a worsening of expectations over the next year regarding unemployment and inflation.

In their Manufacturing Business Outlook, the Federal Reserve Bank of Philadelphia reported a deterioration in general activity, new orders, and current shipments in April. This weakness showing up first in the manufacturing sector is ironic given that the Trump administration’s tariff policies are often defended on the grounds that they will help U.S. manufacturing. The Census Bureau’s data on monthly new residential construction also show some softening in the housing market, particularly for single-family housing starts.

Further, the stock market losses have wiped out any gains from the last year, and measures of stock market volatility remain high—reflecting a lack of confidence in the current economic and policy landscape. The Atlanta Federal Reserve’s GDPNow model estimates a 2.5% decline in real GDP for the first quarter of 2025.

Key labor market indicators could begin to show trouble brewing

This economic turmoil has not yet been reflected in top-line labor market data—though they have shown some weakness in federal employment. This week’s releases of JOLTS, UI claims, and the jobs report could begin to indicate widespread economic distress.

The delay in data reporting could be one of the reasons we haven’t seen a pronounced deterioration in this labor market data. The latest JOLTS data are from February, which showed very little change, but the fingerprints of recent policy decisions are visible for the federal workforce. Figure A shows a significant spike in federal layoffs, hitting 22,000 in February. Tomorrow’s JOLTS release will likely show continued weakness among federal workers in March that may begin to be visible in the overall data.

Figure A

The latest jobs report provided data for mid-March and has shown a net loss of 15,000 federal jobs since January. However, this number may have been kept low because many federal workers were put on administrative leave, and those workers remain officially on federal payrolls. I’ll be surprised if more of the widely reported cuts to the federal workforce and federal contractors aren’t visible in the next jobs report on Friday.

The most updated read on the labor market comes from the unemployment insurance (UI) programs. The Department of Labor aggregates state reports of how many workers filed for initial UI claims each week, and how many people received UI benefits for regular state programs and separately for federal employment. The latest data show higher initial and continued UI claims for federal workers than this time last year, consistent with the spike in layoffs from JOLTS and the drop in employment in the payroll data.

The UI claims data also show a spike in regular continued UI claims (not including federal) in D.C. Figure B shows that national UI claims grew 4.7% over the year but grew a whopping 98.3% over the year for D.C. residents, likely reflecting job losses among federal contractors and related sectors.

Figure B

While the fingerprints of recent policy decisions are clearly showing up in the soft data, it may take time for it to hit the overall labor market measures, at least at the national level. Unless there is a dramatic shift in the current policy agenda, we will likely start to see measured weakness in upcoming labor market data in the coming months.

In 2025, the federal minimum wage is officially a “poverty wage.” The annual earnings of a single adult working full-time, year-round at $7.25 an hour now fall below the poverty threshold of $15,650 (established by the Department of Health and Human Services guidelines). The limitations of how the federal government calculates poverty understate how far the minimum wage is from economic security for workers and their families. 

Set at an adequate level, the minimum wage is one of the strongest policy tools for improving the economic security of low-wage workers, and an effective tool at lowering poverty. Yet instead of addressing this massive hole in our economy’s social safety net by working to raise the minimum wage, congressional Republicans are pushing policies like imposing work requirements on safety net programs and cutting Medicaid. Supporters of these proposals characterize them as tools to incentivize work and protect the dignity of work, but these policies fail to account for the nature of low-wage work in our economy. Instead, they stand to deepen hardship for low-income workers with no economic upside for working people or the larger economy.

The minimum wage and the federal poverty line

When the minimum wage was created as part of the Fair Labor Standards Act in 1938, the policy was intended to protect the nation from “the evils and dangers resulting from wages too low to buy the bare necessities of life.”1 The federal wage floor is clearly not fulfilling this objective anymore because of a historically long period of inaction by Congress. The last time Congress increased the federal minimum wage was in July 2009, meaning that as prices have risen over the last 15 years, the value of the minimum wage has fallen by 30%. Figure A shows how annual earnings for a full-time minimum wage worker fall short of the poverty line for a household of any size.

Figure A

This comparison severely understates the economic vulnerability of these workers and their families. This is because the federal poverty guidelines—which are used at the federal, state, and local level to determine eligibility for public programs like Medicaid and SNAP—are informed by the Census Bureau’s official poverty measure (OPM), a reductionist measure of poverty. The OPM relies solely on a multiple of the current cost of the minimum food diet from 1963 to calculate the poverty line and identify the poor. The Census also publishes a more expansive measure of poverty known as the supplemental poverty measure (SPM), which accounts for the cost of a broader basket of items including food, clothing, shelter, utilities, internet and telephone, but this latter measure does not inform the poverty line used to determine eligibility for public programs.

As Figure B demonstrates, the share of workers in poverty is significantly higher when we rely on the SPM instead. By this measure, more than 10 million workers (7.0%) between the ages of 18 and 64 failed to earn enough to avoid economic deprivation in 2023, the latest year for which these statistics are available, whereas the OPM captured only 4.5% of all workers.

Figure B

The discrepancy between the federal minimum wage and the real experience of workers throughout the country has led 30 states and Washington, D.C., to increase their minimum wage above the federal level. In the 20 states still using the federal minimum, 11.8 million workers earn less than $17 per hour, more than 1 in 5 workers in those states. Those states are disproportionately located in the South. The stagnation of the federal minimum wage allows Southern policymakers to maintain low wages in their economies. Southern workers have lower earnings even when adjusting for cost-of-living differences between regions. In part due to wage-suppressing policies like a low-minimum wage, Southern workers experience greater poverty than those in other regions.

Increasing the minimum wage boosts earnings and reduces poverty

The federal minimum wage is a powerful tool in fighting poverty in the U.S. The best economic research has consistently shown that increasing the minimum wage lifts earnings for low-wage workers, with little to no impact on employment. Research shows that increasing the minimum wage decreases poverty by increasing the incomes of low-income families, even accounting for decreases in public benefits as families earn more from higher wages. In analysis of legislation introduced in 2021 to gradually increase the federal minimum wage to $15 an hour, EPI concluded that the policy would lift between 1.8 to 3.7 million individuals out of poverty, including up to 1.3 million children. 

Despite persistent opposition from the business lobby and obstruction from conservative policymakers, raising the minimum wage remains popular among the public, and some legislators keep raising the call for federal action on this issue. Recently, members of Congress led by Sen. Bernie Sanders (I-Vt.) and Rep. Bobby Scott (D-Va.) once again reintroduced the Raise the Wage Act, which would gradually increase the federal minimum wage to $17 an hour. This would raise wages for more than 22.2 million workers, 4.2 million of whom live in households below the poverty line.

By contrast, Republican policies will make it harder for workers to escape poverty

While the minimum wage has been left to wither, Republican budget proposals in 2025 will either erode other elements of the social safety net or make them much harder to access. Republicans seek to cut Medicaid and ratchet up work requirements on both Medicaid and SNAP.2 This will harm low-income workers and their families, as these social programs help improve the living standards of millions of workers who don’t earn enough to avoid economic hardship. In 2023 alone, social programs that rely on the poverty guidelines kept more than 7 million individuals out of poverty.3 

Republicans have framed cutting benefits and expanding work requirements as a way to encourage people to work. The justification for these proposals is that generous Medicaid and SNAP benefits should be pared back because they encourage recipients to depend on government assistance instead of working. This seems to overlook the fact that two-thirds of non-elderly Medicaid enrollees and more than 85% of working-age adults who receive SNAP do work.

This conservative philosophy is an old idea that is deeply wedded to racist stereotypes about Black families being users of welfare programs. However, evaluating these proposals on their economic merits shows that they will increase hardship for low-wage Americans without creating economic benefit. Medicaid cuts at the levels proposed by Republicans would reduce incomes of low-wage families significantly, including a 7.4% reduction in income for families in the bottom 20% of the income distribution. Medicaid is also a vital investment in low-income children, who grow up healthier and with better education and income outcomes because of the Medicaid support they receive. Research suggests that Medicaid pays for itself through this investment in poor children. Cutting Medicaid will likely reduce these children’s educational achievement and wages earned over their lifetimes.

Similarly, research shows that adding work requirements to benefit programs is a punitive choice with no upside. Studies of work requirements on Medicaid and SNAP find little to no increase in employment outcomes in places where the policies have been implemented. What these policies do achieve is to make it harder for individuals to access the benefits they are eligible for.

A reason why work requirements are ineffective is that they do not account for the precarious nature of low-wage work. Unpredictable scheduling practices are pervasive in low-wage jobs, including cancelled shifts and short notice changes to shift schedules. Low-wage workers also frequently change jobs in an effort to find better-paying work. The scheduling unpredictability and level of turnover in many low-wage jobs can make it difficult for workers to fulfill the consistent work-hour requirements needed to satisfy work requirement policies. Work requirements effectively act as cuts to existing beneficiaries and limit new participants who have little control over the labor market conditions associated with low-wage work.

Conclusion

The minimum wage is a powerful tool for increasing the economic security of low-wage workers. Yet Republican lawmakers have repeatedly denied increases in the federal minimum wage and are now pursuing a tax and budget plan that would cut Medicaid and limit access to safety net programs to finance tax cuts for the richest Americans. If it goes into effect, the combination of tax cuts and Medicaid cuts would effectively lower incomes for workers in the bottom 40% of the income distribution while boosting incomes for the top 1%. These cuts are also likely to harm people and children of color, who are disproportionately more likely to rely on Medicaid. 

If lawmakers were serious about lifting families out of poverty and enabling them to fully participate in the labor force, they would be enacting policies to raise wages and expand access to good-paying jobs. By keeping wages low and making it more challenging to access benefits, lawmakers are seeking to deprive low-income households of the resources they need to thrive.

1. S.Rep. No. 884 (75th Cong., 1st Sess.), p. 4

2. Supplemental Nutrition Assistance Program (SNAP, formerly known as the food stamp program) is a crucial safety net program providing benefits so that low-income people in the United States can purchase food. SNAP has work requirements for most beneficiaries ages 16–59 who are able to work. In addition, there are more stringent work requirements for able-bodied adults without dependents (ABAWDs).

3. These individuals lived in households that qualified for SNAP benefits, housing subsidies, free or reduced-priced school meals, or cash assistance from the Temporary Assistance for Needy Families (TANF) program.

Lisa Kailai Han and Sean Conlon of CNBC report S&P 500 closes higher for a fourth day in a row, notches 4% gain for the week:

The S&P 500 rose on Friday, adding to its strong gains for the week, as investors continue to navigate an evolving global trade landscape while major tech names got a boost.

The broad market benchmark ended 0.74% higher at 5,525.21, while the Nasdaq Composite added 1.26% to end at 17,282.94. The Dow Jones Industrial Average lagged, but managed to close 0.05%, or 20 points higher, at 40,113.50.

Alphabet rose 1.5% after the Google parent and “Magnificent Seven” name reported a beat on the top and the bottom lines for the first quarter. Tesla, meanwhile, popped 9.8%, while fellow megacap names Nvidia and Meta Platforms advanced 4.3% and 2.7%, respectively.

The major averages rose on the week, notching their second positive week out of three. The S&P 500 gained 4.6%, while the Nasdaq climbed 6.7%. The Dow has underperformed but still cinched a one-week advance of 2.5%. With these latest gains, Nasdaq is now slightly positive for the month, but the S&P 500 is down 1.5% month to date. The Dow has fallen 4.5% so far in April.

Stocks have been taken for a wild ride in recent weeks, as traders try to make sense of the severity of President Donald Trump’s tariffs first unveiled on April 2. Mixed messaging around trade has added to the volatility.

China said Thursday that there were no talks with the U.S. on a potential trade deal. This came after the U.S. appeared to soften its stance on trade relations with China.

On Friday, Time magazine published comments from Trump that said he would consider it a “total victory” if the U.S. has high tariffs of 20% to 50% on foreign countries a year from now. But his Tuesday comments published Friday also said the president expects announcements on many deals to be coming “over the next three to four weeks.”

Adding to the confusion, Trump told reporters from Air Force One that he would not drop tariffs on China unless “they give us something.”

Still, going forward, Jay Hatfield, founder and chief investment officer of InfraCap, is optimistic that the worst of the tariff-induced uncertainty is over.

“The confusion about whether there’s really talks going on with China or not took some steam out of the market,” he told CNBC in an interview. “Our view is that we’ve reached peak tariff tantrum and so it’s likely to be more positive than negative.”

Hatfield believes the key driver for markets next week will be earnings from big hyperscaler firms such as Microsoft and Amazon.

Amalya Dubrovsky , Brett LoGiurato and Ines Ferré of Yahoo Finance also report Tesla surges 9%, S&P 500 gains for 4th-straight day in longest win streak since January:

US stocks rose on Friday, led by Big Tech, as President Trump's latest comments on tariffs kept trade tensions in focus.

The Dow Jones Industrial Average rose slightly. But the S&P 500 gained 0.7%, closing out its longest winning run since January. The Nasdaq Composite gained nearly 1.3%.

Tech stocks led a four-day rally on the S&P 500 and Nasdaq. AI chip maker Nvidia (NVDA) rose nearly 4%. EV maker Tesla (TSLA) jumped nearly 10% amid optimism that entry into the Indian market is near, and as the US said it would ease rules around self-driving technology.

The S&P 500 gained more than 4% for the week as investors focused on Trump's generally optimistic tone on trade talks and Fed officials hinted at possible rate cuts as early as this summer.

On Friday afternoon, Trump told reporters he won't drop tariffs on China unless "they give us something" in return. He also said another tariff pause is unlikely.

Meanwhile, reports circulated that China may pause its 125% tariff on some US goods, boosting market sentiment. Trump has claimed progress in negotiations with China, but China denied the existence of negotiations and demanded that the US lift its tariffs.

In individual movers, Alphabet (GOOG, GOOGL) stock rose after the company beat on earnings and announced a dividend hike and a $70 billion stock buyback. Intel's (INTC) stock fell despite beating earnings estimates. T-Mobile (TMUS) and Skechers (SKX) tumbled too, with both companies flagging the early effects of the tariffs.

Next week investors will hear from software giant Microsoft (MSFT) and social media platform Meta (META) as they report earnings on Wednesday. Tech giant Apple (AAPL) and e-commerce platform Amazon (AMZN) will also report earnings on Thursday.

It was a strong week in markets led by mega cap tech shares and other hyper growth stocks:

 Are we past peak tariff tantrum? Most likely but with Trump, you never know.

One thing is for sure, the US economy is a lot more resilient than most analysts think and all this nonsense on the "end of American exceptionalism" and the "death of the US dollar" was way overblown.

In my opinion, the US dollar which has been hammered this year, especially after tariffs were announces, is due for a big bounce up:

As far as the Nasdaq, it bounced big this week but remains below its 10 and 50-week exponential moving average:

It was really semiconductor shares (SMH) which propelled tech stocks higher this week but there too, hard to read more than a bounce for now:

 

There are a lot of bounces from deeply oversold levels but it doesn't mean new uptrend has resumed.

Having said this, if economic data and earnings prove to be better than expected in Q2,  this might be a decent quarter in the market.

I'm more concerned about Q3 and Q4 when delayed effects of tariffs kick in.

Interestingly, Reuters reports a JPMorgan survey shows consensus over weak dollar, US stagflation: 

There is a much higher risk of stagflation than recession in the U.S. economy over the next year, while the asset class most expected to outperform in 2025 is cash, according to the results of a JPMorgan survey published on Friday.

The trade war started by the U.S. administration of Donald Trump is seen by the majority as the policy with the most negative impact on the world's largest economy.

Three in five respondents believe U.S. economic growth will stall and inflation will remain above the 2% Federal Reserve target, with one-in-five respondents expecting inflation above 3.5%.

There is also consensus on the weakness of the U.S. dollar, with a majority expecting the euro at or above $1.11 to end the year, at least an 8% decrease for the U.S. currency this year.

"Our meetings were noteworthy for the differences in views between US investors compared to global investors on the consequences and market implications" of the regime change in the United States, JPMorgan said.

Cash is expected to remain expensive as yields on the U.S. 10-year note are not seen declining much from current levels. Over half of respondents believe the benchmark yield will be at or above 4.25% by the end of 2025.

Almost half of the respondents expect Brent oil prices to stabilize not far from the current price of $66 per barrel, while 3 in 10 foresee prices dropping to or below $60.

At 13%, more investors bet that emerging market equities will outperform other asset classes than the 9% who think developed stocks will.

Fifty-seven percent of respondents expecting Wall Street stocks to be the asset class with the largest outflows this year.

ESG investing was out of favor with 30% committed to maintaining their strategies while 42% showed no interest.

JPMorgan's survey was conducted on April 1-24 and 495 investors responded, according to the bank.

Note when this survey was conducted and the only reason I'm sharing it is because it will likely turn out to be spectacularly wrong.

Lastly, my friend and trading mentor Fred Lecoq who now lives in beautiful France sent me a Wall Street Journal article from Jason Zweig on the mistakes you're making in the stock market -- without even knowing it:

If you’re young, you know stocks and bitcoin can lose money at lightning speed. Just think of March 2020 or 2022. But your experience also tells you they will bounce back even faster and go on to new highs.

If you’re a middle-aged bond investor, you lived through almost nothing but falling interest rates and bountiful returns from 1981 through early 2022. In an earlier generation, the stock-market crash of 1929 haunted many investors, who shunned stocks for decades after.

Peter Bernstein, a financial historian and investment strategist who died in 2009, liked to say that investors have memory banks: the market returns collectively earned by people of similar age. Experience shapes expectations.

The problem is that your memory bank can deceive you in dangerous ways. Your experience of the past is a reasonable guide to the future only if the future turns out to resemble the portion of the past that you’ve lived through. And it often doesn’t.

Given the markets’ wild oscillations amid the uncertainty over President Trump’s trade policy, it’s worth looking at a few investing beliefs that your memory bank might hold—and asking whether they’re still valid.

Growth crushes value

For most of the past decade-and-a-half, value stocks—companies with lower share prices relative to their earnings and assets—have limped along, far behind higher-priced growth stocks like Apple, Nvidia and Tesla.

So far this year, though, Warren Buffett’s Berkshire Hathaway, the standard-bearer for bargain-hunting in the stock market, has gained 17.3%, bolstered by its $330 billion in cash. The technology-laden Nasdaq Composite Index is down 10.9%.

No matter how much the chaos over trade policy upsets the global economy, “the underpinnings of value will still matter,” says Rob Arnott, chairman of investment firm Research Affiliates. 

Value stocks should be less vulnerable to the market turmoil than growth stocks. “History shows that during times of turbulence, value beats growth,” says Arnott.

And for most of the past century, cheaper stocks outperformed more glamorous growth stocks—not the other way around, as your memory bank might suggest. If most of your stock portfolio is in growth, consider adding some value stocks.

The U.S. is the only place to be

For most of the past two decades, international markets ate U.S. dust as the dollar strengthened and American technology companies boomed.

That was then, this is now. In 2025, the MSCI ACWI ex USA Index, which tracks markets outside the U.S., is beating the S&P 500 by more than 14 percentage points.

If you’re a younger investor, your memory bank can’t tell you that international markets excelled for much of the past half century. From 1971 through 1990, the MSCI EAFE index of developed international markets outperformed the S&P 500 by an average of 4.2 percentage points annually, according to T. Rowe Price. For part of that period, overseas investments benefited from the tailwind of a declining dollar, which makes earnings in other currencies more valuable to American investors.

Even after their recent run-up, international stocks are relatively cheap, trading at less than 16 times earnings over the past 12 months and under two times book value, or net worth; U.S. stocks are at roughly 24 times earnings and more than four times book value.

If the dollar continues to weaken, that will strengthen overseas stocks; even if it doesn’t, the U.S. isn’t the only game in town. There’s a whole planet out there.

Buy the dips, and time will bail you out

The 1994 book “Stocks for the Long Run,” by finance professor Jeremy Siegel of the University of Pennsylvania’s Wharton School, argued that there’s rarely been a period of at least 20 years when stocks didn’t beat bonds after inflation.

Recent research by Edward McQuarrie, a business professor emeritus at Santa Clara University, shows that isn’t true. After spending years meticulously correcting the historical record of U.S. asset returns back to 1793, McQuarrie found numerous 20-year periods in which bonds beat stocks after inflation, most recently over the two decades ended in 2012.

None of this means you shouldn’t buy stocks or hold them for the long term. It does mean stocks aren’t guaranteed or foreordained to beat bonds, even over long periods.

Their returns are a function of interest rates, inflation and how expensive stocks are relative to bonds. Right now, stocks are far from cheap. Temper your expectations and focus on saving more, in case stocks don’t earn more.

Cash is trash

Many investors can’t forget the period from 2009 through 2021, when cash often earned less than nothing after inflation. It couldn’t even play defense.

In 2025, however, cash is playing offense. With yields exceeding 4%, Treasury bills and money-market funds are clobbering stocks so far this year. They’re also outpacing the official measure of inflation.

Gold always glitters

If you’ve recently invested in gold, you know it shines during times of crisis. Your memory bank might not include gold’s historically dull performance after rapid peaks in its price. Gold didn’t surpass its January 1980 record closing price of $834 until nearly 28 years later and didn’t rise above its August 2011 closing high of $1,892 for almost nine years after that. Even at its recent price of about $3,300 it has yet to exceed its 1980 closing high after adjusting for inflation, according to Dow Jones Market Data. Gold is gleaming now, but it could tarnish when calm returns.

As you examine your beliefs, be sure to consult the longest-term data available, to capture periods you didn’t experience personally.

Testing the validity of what’s in your memory bank won’t prevent you from being guided by your investment experience. It might help prevent you from being its prisoner.

 Great insights but this time is different, or is it?

At this point it’s not a question if we are in a recession, it’s a question how severe it will be, and how long will it last. pic.twitter.com/OpnzGbUrPo

— Michael A. Arouet (@MichaelAArouet) April 24, 2025

US stocks are barely pricing in an economic slowdown, let alone a recession. pic.twitter.com/98q5K7C6VW

— Peter Berezin (@PeterBerezinBCA) April 25, 2025

Alright, have great weekend everyone.

Below, Atlanta Fed President Dennis Lockhart joins 'Squawk Box' to discuss the state of the economy, impact on the Fed's inflation fight, impact of policy uncertainty, rate path outlook, and more.

Next, Craig Fuller, FreightWaves CEO, joins 'The Exchange' to discuss what's going on with freight activity.

Third, on a more positive note, Ira Robbins, Valley Bank CEO, joins 'Power Lunch' to discuss consumer sentiment, lending and the regional banking environment.

Fourth, Nouriel Roubini, chair and CEO of Roubini Macro Associates, says US exceptionalism will remain despite bad trade and immigration policies. He speaks during an interview on "Bloomberg The Close."

Firth, Adam Parker, Trivariate Research CEO, joins 'Squawk on the Street' to discuss earnings, Trump's trade war and the choppy market.

Sixth, 3Fourteen Research's Warren Pies, JPMorgan’s Stephanie Aliaga and Truist’s Keith Lerner, join 'Closing Bell' to discuss Trump's trade wars, the technical levels of a market bottom and their overall outlook. Take the time to watch this discussion.

Lastly, Aswath Damodaran, NYU Stern school of business, joins 'Closing Bell' to discuss his valuation of the Mag 7. Damodaran isn't throwing in the towel on Mag-7 stocks and I think he's right.

Today, CDPQ published its 2024 Annual Report:

CDPQ today released its Annual Report for the year ended December 31, 2024, titled “Investing for future generations”.

In addition to the financial results published on February 26, CDPQ presents an overview of its activities over the last year, which include:

• A presentation of CDPQ’s depositors and their respective net assets as at December 31, 2024
• A detailed analysis of the returns for the global portfolio and for the different asset classes
• A risk management report
• A portrait of CDPQ’s activities in Québec, including its main achievements to support company growth and projects that contribute to economic development, as well as a summary of its investments in Québec
• A section on governance, including reports from the Board of Directors and its committees covering audit, governance and ethics, investment and risk management, human resources management and compensation for senior management and employees, as well as compliance activities
• The Sustainable Development Report
• Our financial report and the organization’s consolidated financial statements
• Report on compliance with the Global Investment Performance Standards (GIPS).

The Annual Report Additional Information for the year ended December 31, 2024, was also published today.

ABOUT CDPQ

At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public pension and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2024, CDPQ’s net assets totalled CAD 473 billion. For more information, visit cdpq.com, consult our LinkedIn or Instagram pages, or follow us on X.

Take the time to read CDPQ's 2024 Annual Report here.

The Annual Report Additional Information for the year ended December 31, 2024, was also published today.

Recall, I already went over the 2024 results with Vincent Delisle, CDPQ's Head of Liquid Markets. You can read that comment here. 

The annual report comes out later than the release of the results because it needs to be approved by the Quebec National Assembly.

It is beyond the scope of this post to go over the entire annual report, it takes at least a week to go over it in fine detail.

Still, I'd like to quickly go over a few things.

First, the message from Chair Jean St-Gelais:

 

I note the following: 

In light of these achievements, the Board has a positive view of the 2024 financial year, during which CDPQ was able to improve its depositors’ financial health and position its portfolio well for continued success. On behalf of the members of the Board, I would like to thank all CDPQ employees for the commitment they demonstrate every day. 

I will come back to this below because as always, CDPQ has some critics who claimed bonuses were outrageous this year.

I also noted this:

Throughout the year, the Board of Directors and its committees oversaw the implementation of CDPQ’s strategic orientations, as well as sound governance and the maintenance of the highest standards in all areas. We also ensured that the activities complied with the Act respecting CDPQ, as well as the depositors’ and its own investment policies. 

There was obviously no mention of CDPQ being rocked by a major bribery scheme in India but I can assure you the Board had to shore up governance to make sure this never happens again.

Next, let's quickly go over CEO Charles Emond's message below:

I note the following:

Despite the turbulence, our net assets have grown by $133 billion over five years, reaching $473 billion at the end of 2024. Over this period, we generated $6 billion in value added and $17 billion over ten years. The results that CDPQ obtained over the last ten years have also helped improve the financial health of the plans of our clients: 48 depositors, each with their own investment policy and specific risk tolerance.

For 2024, the Québec Pension Plan, the pensions for more than six million Quebecers, posted a return of 11.0%. Our total portfolio generated a return of 9.4% over one year. Its performance was driven by our activities in the public equity markets, which stood out against indexes that are more concentrated than ever. Among other drivers, our private equity investments rebounded strongly and our infrastructure assets have once again delivered solid performance. The year proved to be more difficult in real estate due to our longstanding exposure to the U.S. office sector, which faces persistent challenges. Lastly, the rise in long-term rates weighed on our fixed income activities, which  nevertheless present attractive prospects due to a high current yield. The financial health of our main depositors’ plans therefore improved in 2024.

Rising asset values and higher yields lowers future liabilities and improves the financial health of CDPQ's depositors.

Next, let's look at 2024 highlights:

 

Next, I want to discuss long-term performance:

 Important items worth noting so pay attention here:

•  Over five years, the annualized weighted-average return on depositors’ funds was 6.2%. Over the period, the total portfolio outperformed its benchmark portfolio, which posted an annualized return of 5.9%, representing $6 billion in value added. 
• Over ten years, the annualized return on the total portfolio was 7.1%, surpassing the benchmark portfolio’s 6.5% return. This has enabled the portfolio to generate $17.1 billion in value added during this time.

Now, why am I bringing this up? Because critics focused on the fact that CDPQ generated 9.4% last year, below the benchmark portfolio’s 11.8% gain or -$10.1 billion in value added.

As I've stated many times on my blog, all of Canada's large pension investment managers underperformed their benchmark last year mostly owing to the relative performance of private equity relative to a public equity index dominated by Mag-7 dynamics.

This is why it's more important to look at 5 and 10-year annualized returns relative to benchmark to gauge value added and keep in mind, compensation is based mostly on 5-year relative performance.

I think a few people commenting on Julien Arsenault's La Presse article got it all wrong here, focusing way too much on one-year return.

I also noted his in the annual report:

It is also worth noting the significant impact that the customized rate exposure product—a tool depositors have been using increasingly in the last two years—had on the overall portfolio’s performance. This product allows them to be more exposed to the interest rate factor, in particular to ensure a better match with their long-term liabilities and greater diversification of their funds. The result is more stable funding of their plans, but the return on funds is more sensitive to rate fluctuations.

With interest rates rising as they have in recent years, the use of this product limited the performance of CDPQ’s total portfolio (see Table 21, page 42). Conversely, depositor plan liabilities saw a general  decrease, which, combined with the return on assets, improved their financial health.

Keep all this in mind as you analyze results properly.

Next, have a look at CDPQ's asset mix and hw it shifted in 2024 relative to the previous year:

There was a slight increase in Equities due to the strong performance there and a slight decrease in Real Assets due to the underperformance in Real Estate:

The outperformance in all the Public Equities mandates was particularly striking last year and I doubt they will be able to keep that up this year but I'm rooting for them.

And Private Equity's 17.2% return underperformed its benchmark return of 20% but again, this is an exceptionally strong performance and benchmark was driven by a handful of tech stocks last year.

The same goes for Infrastructure which gained a solid 9.5% last year, underperforming its benchmark which gained 15% (lots of beta in that benchmark!).

Anyway, the main thing to remember is even though CDPQ didn't outperform its benchmark last year, it posted a solid year.

I would invite you to read the entire annual report here to fully appreciate all the activities at the organization.

Lastly, on compensation which is a hot topic in the media, some tables:

Again, compensation is based mostly on five-year results and yes, all these people are extremely well compensated not just by Quebec standards but by any standard and they know it.

As Derek Murphy once told me when I was working at PSP: "This is the best gig in the world".

Tell me about it, at least he was honest about that.

By the way, I will give credit to Julien Arsenault of La Presse for writing an article earlier this month where he went over the huge severance packages given out at CDPQ over the last two years.

But even there, I caution my readers, the longer someone is at an organization and the higher up they are, the more expensive their severance package will be.

The table below is available through CDPQ's answers to access to information (only available in French):

Helen Beck and Marc Cormier obtained the highest severance packages in 2023 and 2024 because they were there the longest and had very senior positions.

Alright let me end it there, it depresses me seeing how much money all these people are making even if it's justified.

Below, CNBC’s Steve Liesman and Cleveland Fed President Beth Hammack joins 'Squawk Box' to discuss the state of the economy, impact of policy uncertainty, recession concerns, the Fed's inflation fight, rate path outlook, and more.

Mary McDougall, Alexandra Heal and Sun Yu of the Financial Times report pension groups cut back on pioneering private equity investments:

Top pension funds are stepping back from competing head-on with private equity groups to buy up companies, instead opting to invest alongside them to secure access to the best deals.

Caisse de dépôt et placement du Québec (CDPQ) and the Ontario Municipal Employees Retirement System (Omers) are scaling back the proportion of their funds exposed to directly owned private companies, while Ontario Teachers’ Pension Plan has said it is eyeing more strategic partnerships.

A tough period for exiting investments over the past two years has encouraged the Canadian pension groups to back more companies alongside huge private equity managers as direct ownership has become increasingly challenging, requiring big in-house teams and a higher risk appetite.

“The private equity downturn is making the direct investing model harder as we are facing a shortage of viable projects and difficulty in exiting from our existing investments,” said an executive at one of the funds.

There are three main ways pension funds allocate to private equity: direct investing, where they buy a stake in a company on their own; through a private equity fund; or through co-investments, where they invest in companies alongside a private equity fund but without having to pay the fund fees.

Canada’s $3.2tn pension system is a major private equity investor with 22 per cent of its public sector funds’ assets allocated to the asset class, according to think-tank New Financial.

At present, the nine biggest Canadian pension funds have about half of their private equity exposure in buyout funds and half through direct holdings and co-investments, according to analysis from CEM Benchmarking.

But that balance has shifted as pension funds have come under pressure to invest in buyout funds to secure access to the best co-invest deals, where they get to invest alongside the firms but without having to pay fund fees.

CDPQ is in the second year of a five-year plan to lower the proportion of direct private equity investments from 75 per cent to 65 per cent, while Omers pivoted from allocating very little to private equity funds to announcing last September it would no longer invest directly in European opportunities.

Ontario Teachers’ has said it is “tactically looking to invest more with other partners in areas where it makes sense as the portfolio and market evolves”, though direct investments are still a core part of its strategy.

The shift comes as the private equity industry has ballooned in size, resulting in fierce competition for both assets and talent — and as some Canadian pension funds are also rethinking their US exposure.

Marlene Puffer, former chief investment officer at Alberta Investment Management Corporation, said Canadian pension funds were “in the boat of having to add more value into every holding because exits are more challenging now — they have to do more hands on management and it becomes increasingly complex”.

She added that pension plans allocated money to private equity funds on the understanding that they would be invited to invest in many of the co-investment opportunities that arise with them.

It was “difficult for Canadian pension funds to compete for talent with Apollo that pays much better”, another fund executive said.

Martin Longchamps, CDPQ’s head of private equity and credit, said the rationale behind its shift towards more partnerships was to “drive access to deal flow through those relationships”. Omers’ chief investment officer, Ralph Berg, said the pension fund had “evolved our investment strategy over the last couple of years to explore different models and use funds where it is complementary”.

Canada Pension Plan Investment Board, the country’s largest pension fund with C$699bn (US$504bn) in assets, said it had “always pursued a partnership strategy and continue to be committed to that approach”.

I read this article yesterday and it brought me back to a meeting I had with Mark Wiseman when he was CEO of CPP Investments years ago.

We were in a small conference room at their offices in Toronto and he explained to me while they mostly do direct investing in infrastructure and real estate, in private equity all they were doing back then was investing in top funds and co-investing alongside them on larger transactions.

"If I could afford to hire David Bonderman, I would but I can't so we invest in his fund and co-invest alongside them on larger transactions." 

Wiseman successor, Mark Machin, told me the same thing when I met him n Montreal:"In private equity all we do is invest in top funds and co-invest with them on larger transactions to reduce fee drag."

John Graham also expressed the same views when I met up with him here in Montreal.

That's three CEOs of the largest and most important pension fund in Canada with the biggest private equity portfolio in the world among institutional investors expressing the same thing.

Basically, if you can't beat them, join them and negotiate hard on co-investments to lower fee drag.

There is nobody working at a pension fund in Canada who can compete with the world's top private equity funds. 

Sure OMERS and OTPP did some purely direct deals and some were incredibly profitable over the long run but it's almost impossible nowadays to compete with the top private equity funds and things are also changing in infrastructure and real estate.

Just like top hedge funds that pay big commissions to investment banks gain access to the best trades first, top private equity funds  that pay huge advisory fees to big banks are get the first phone calls when a major deal is in the works.

It doesn't mean that there aren't good private equity managers at Canada's large pension funds, it just means they cannot compete head on with top PE firms.

And to be clear, the majority of direct private equity investing at Canada's Maple Eight is co-investing alongside top funds (a form of direct investing) not purely direct investing where they source deals themselves.

What about Erol Uzumeri, one of the founders of Searchlight Capital Partners?  He came from OTPP Private Capital.

Yes he did and he was lucky that Derek Murphy, former Head of PE at PSP, seeded him because without that anchor investor, Searchlight would have never gotten off the ground.

Same goes for Steve Faraone and Mike Murray of Peloton Capital Management. They too came from OTPP Private Capital and were lucky billionaire Steven Smith seeded them and IMCO made an allocation to them because phone calls were made at the highest level.  

Don't get me wrong, Erol, Mike and Steve are all excellent private equity investors but no way in hell would they be where they are without seed capital from major anchor investors.

The bottom line is this, if you're as good as KKR, EQT, TPG, Blackstone, Apollo, etc. then why would you work at a Canadian pension fund? 

The same goes when traders who use pension fund's balance sheet tell me "You know, I can easily work at a big hedge fund."

I laugh and tell them straight in their face: "No you can't buddy because if you can work at Citadel, Millennium, Bridgewater or Rokos Capital Management, you would be there making millions in bonuses every year."

Again, it doesn't mean they are bad traders but the world of elite hedge funds is on another level, just like the world of elite private equity funds.

What else do I want to get off my chest?

OTPP once did a performance attribution on their private equity holdings and it turned out co-investing and direct investments were the best performers over the long run and the worst performance came from fund investments and syndicated investments where they got a small slice and didn't do their own due diligence on a deal. 

Again, they had done some great purely direct deals years ago but times have changed drastically which is why OTPP is reassessing its private equity approach.

Same goes for OMERS and others, there's simply no choice, times have changed, adding value is harder, exits are extremely challenging, competing in this arena with top funds is not in the best interest of your pension fund.  

And times are also changing for real estate and infrastructure so large pension funds better adapt fast or risk underperforming there too.

And by adapt, I mean invest in top funds and co-invest alongside them.

The world of pension fund investing in private markets is all becoming investing in strategic partners that can add value over the long run.

Always remember what Mark Wiseman told me: "If I could hire David Bonderman, I would but I can't afford him."

It's that simple folks, let's not make it out to be more complicated than what it truly is. 

Private equity will always remain an important asset class but if you don't have the right approach investing in top funds and co-investing alongside them on larger transactions to reduce fee drag, you're going to significantly underperform over the long run.

Below, Joseph Bae, Co-CEO, KKR discusses what's driving private equity returns and where its finding value across the market with Bloomberg's Sonali Basak at Bloomberg Invest.

And Bruce Flatt, CEO, Brookfield discusses tariffs against Canada, structural trends in asset management and investing in digital infrastructure with Bloomberg's Erik Schatzker at Bloomberg Invest.

Both interviews are from a month ago and well worth watching.