Robert Bertram This is Me

Education

 Web References

1. 1. IIMagazine.COM - Pensions - Second city, first rate.

   www.iimagazine.com/channel/pen - [Cached]

   Published on: 6/7/2000   Last Visited: 6/14/2001

   The two men who orchestrated the turnaround , Claude Lamoureux , president and chief executive , and Robert Bertram , senior vice president and chief investment officer , hardly fit the profile of high-powered , high-strung financiers.
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   But don't be deceived : Lamoureux , 57 , has built a talented team that could hold its own against many mainstream money managers , and Bertram , 54 , has harnessed that team's expertise to execute a series of bold financial strategies.
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   But Lamoureux and Bertram also made the right investment moves at the right time.
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   When we got here there were only the bonds , Bertram says. We turned the pension into a broadly diversified fund..
   
   Most critically , the duo aggressively pushed the fund into stocks for the first time , including non-Canadian ones. To get around government restrictions against investments in foreign equities , they cleverly ( and legally ) found a way to invest outside Canada using derivatives , generally equity swaps that provide the returns of foreign indexes. This allowed the fund to enjoy at least some of the fruits of the greatest bull market in U.S. history.
   
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   Casting aside the fund's history of caution and conservatism , Lamoureux and Bertram moved Ontario Teachers into real estate , commodities , junk bonds , quantitative investing , emerging markets and private equity.
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   Bertram is a member ( he was president until his term expired last year ) of the Pension Investment Association of Canada , a lobbying group that has been pushing the federal legislature to lift or raise those restrictions. We'd like to see them lifted , Bertram says. But I don't see much hope of it in the future..
   
   FOUNDED IN 1917 , THE teachers' pension fund acted for many years as an agency of Ontario's government. It took contributions from the province and the Ontario Teachers Federation union and invested them in solid , staid nonnegotiable provincial bonds. That approach began to unravel in 1975 , when the teachers won the right to have their benefits indexed to the cost of living. Bond returns and , especially , the contributions made by the government and the teachers didn't nearly keep pace with soaring inflation.
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   A native of Eston , Saskatchewan , Bertram had earned an MBA from the University of Alberta. He spent 19 years working in finance at Alberta Telephone Co. , where , as treasurer , he handled a $2 billion pension fund. When Lamoureux approached him in 1990 , Bertram , too , was ready for a new challenge.
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   Working closely with the board , Lamoureux and Bertram transformed the fund.
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   Ontario Teachers has a small , actively managed portfolio of U.S. stocks , but the bulk of its foreign shareholdings are indexed , with the pension plan getting around its 20 percent limit through a strategy devised by Bertram with help from Goldman , Sachs & Co. Its foreign holdings are funded for the most part through a combination of interest rate and equity swaps. Ontario Teachers first swaps the fixed coupon on its provincial nonmarketable bonds for the floating-rate interest on foreign debt ; it then swaps the floating coupon for the returns of foreign indexes. Because the fund doesn't actually own the underlying foreign assets , it technically meets government guidelines.
   
   Among its foreign holdings , nothing has beaten U.S. stocks in recent years. They account for 19 percent of the total portfolio , with most of the holdings tracking the Standard & Poor's 500 index.
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   To help bolster fixed-income returns , Lamoureux and Bertram have been adding Canadian real bonds , as they are called , which were precursors to the U.S. Treasury inflation index bonds by a couple of years.
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   Lamoureux and Bertram had an added reason to make the switch.
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   Says Bertram : If they want us to do social investing , then they should draw up a policy , and we would live with it..
   
   Many Canadians also resent the power that Ontario Teachers and other Canadian institutional investors now exercise over the nation's capital markets.
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   Bertram agrees , but sees the fund as a good corporate citizen. There is a lot that is indexed , and we don't control that , he says. And we have proxy policies and conflict-of-interest policies that ensure that we operate in a straightforward manner..
   
   Lamoureux and Bertram have the courage of their convictions , and they have never been afraid to act on them.