As an industry leader, the Caisse de dépôt et placement du Québec (the Caisse) invests in all asset classes. Started in 1965, the company is among the largest fund managers in North America, and it is also one of the top 10 global real estate asset managers. Behind its success sit 13 senior managers, including Claude Bergeron, chief risk officer and the executive vice president of legal affairs. With his more than two decades of experience with public and private ventures, he led an important push at the Caisse to restructure critical short-term investments known as asset-backed commercial paper (ABCP), which had contributed to the global financial crisis. Below, he shares his battle-tested philosophies and explains how a new program to strengthen risk-management practices has the Caisse positioned for continued success.
Advantage: The Caisse is almost 50 years old. That’s quite a milestone. What is the firm like today?
Claude Bergeron: We’ve developed a significant edge in the market because of our size and our long-term approach. We can offer a long-term partnership with companies in which we invest, and that’s the most important thing. What drives that is the sophisticated people that work here in many fields. We can make direct investments, large investments, and offer very specialized expertise and also the worldwide experience to support those investments.
You’re heavily involved in real estate. Talk a bit more about that.
We are the 10th-largest real estate asset manager in the world, with over $35 billion invested across the globe, from the United States to Canada to Europe to Brazil and all over. We invest in office buildings, residential projects, and shopping centres in New York, Montréal, Paris, London—everywhere.
And what else is there besides real estate?
We have a strategy built around less liquid assets, emerging markets, and quality equity investments. We have specialized portfolios in private equity and infrastructure investing infunds or through direct investments. We have an absolute return strategy and try to outperform indexes over the long term. We also have bond portfolios that include corporate bonds in the US and Canada. We have 30 clients—which are large public-pension and insurance funds—whose net assets total $186 billion.
You’ve recently won two prestigious awards: the Canadian General Counsel of the Year Award and the Commerce-ZSA Québec Lifetime Achievement Award. How have you developed and maintained your expertise over time?
This industry is very challenging because it is always changing. When I started at the Caisse, there wasn’t so much competition or benchmarking done in the industry. We were once the first among peers [to invest] in private equity, and now there are so many institutions and so much competition from all parts of the world. That brings upon us the burden to evolve and change. We have to work on research and development every day. Our people matter a lot. They make the difference for the performance of our organization. You have to establish a culture of performance and inspire people to rise to the challenge.
Earns his law degree from the University of Montréal
Accepts a position as a senior legal advisor at the Caisse
Receives a promotion to VP after five years with the firm
Becomes the executive VP of legal affairs and secretariat
During the global financial crisis, Bergeron leads the Caisse through a difficult restructuring of its ABCP investments
And people should work in an area they like, right? Law school was not your first goal.
It’s very important. I was born and raised in Montréal and earned my law degree, but, yes, law was my second choice. I was fascinated by economics, but law seemed more complex and challenging, so I decided to start with that. I had a chance to practice law in the area of taxation for the Department of Revenue, and that was the start to combine my interests of law and economics. Then I became a managing associate and kept moving up until I joined the Caisse, which gave me the chance to get closer to my initial goal of working in management, economics, and law.
You’ve been involved in a number of international deals and takeovers, but you’re most well known for an important restructuring. Talk about that.
The financial crisis has been a source of opportunity for us to build on and rethink our strategy. We had $13 billion invested in [ABCP] at the time the markets collapsed and we were hit with the financial crisis. The investors had to spend 18 solid months transforming their short-term holdings into long-term investments. This helped lead the Caisse out of the crisis. There was a change in management, and I was asked to become the executive vice president of legal affairs and secretariat—and later the acting chief risk officer.
How long did that take?
At least 18 months were devoted to developing new ways to address risk management and build a new structure. There was no transparency, so we didn’t really even understand what we held in our portfolio. We spent the first three months trying to gain access to information and agreed on a standstill. We formed a committee to review the solutions available. One fell through when the credit-market spreads broadened. A few months later, the Lehman crisis struck, and markets collapsed yet again. We had to negotiate our way out of the crisis a few times in light of the financial environment.
How did all your previous positions prepare you to handle that?
My negotiation and people-management skills and my in-depth understanding of financial products were already well developed. One of the most important things is judgment. You have to evaluate where your limits are and get to the root of the problem.
How have you changed the risk-management strategy after coming out of this crisis?
I really developed a large understanding of what went wrong and have been able to implement and accelerate a new risk-management framework. We had invested too much money in one kind of product. We spent the last four years shifting our risk team from risk measurement to risk management and working to better support our investment groups. We have a strong risk profile that addresses the needs of the firm and directs all decisions and strategies. I report to my CEO and have a direct and open line of communication with the board. Communication and transparency around risk are fundamental.