Despite the headwinds in Montreal's financial hub, the success of Trans-Canada Capital (TCC) proves that it is possible to get this crucial industry off the ground.
Posted Oct 5, 2020 at 6:30 am
Air Canada's subsidiary, one of the city's best-kept secrets, has been turning 180 degrees for 10 years. And the leaders have their heads full of ideas: bringing in outside clients, launching an insurance company that could grow as big as the Industrial Alliance …
“It is very hot here! Launches the president, Vincent Morin. “We are convinced that we have talent in Montreal. We are able to create interesting things, ”he says.
Who would have believed that in 2009?
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As a result of the credit crunch, the airline's pension plan has a massive 2.8 billion deficit, ten times the market value of Air Canada, which is undergoing restructuring.
As an advisory actuary at Mercer, Vincent Morin proposes an entirely new approach. Instead of a classic portfolio of 60% equities and 40% bonds, he recommends Air Canada an innovative strategy. Essentially, it's about drastically increasing the share of bonds to reduce risk, while using derivatives and alternative investments to achieve attractive returns.
The company likes the idea. So much so that she put Vincent Morin in charge of her retirement plan.
He started with a blank sheet of paper and brought 80% of management back home. The team, which numbered only five, now has 75 employees working in French in Montreal, where Air Canada is headquartered.
"We started looking for young people we grew up with," said Chief Operating Officer Julie Pominville. While high finance is increasingly based on data or artificial intelligence, Montreal is a great breeding ground where it is easier to retain talent than in the United States, where giants like Google are picking up programmers. and other experts.
The TCC team delivered results comparable to the biggest clubs in New York or London. Over 10 years, TCC has an annual compounded return of 11.4%, which represents an added value of 3% per year compared to its benchmark.
The pension plan is now in surplus of $ 2.6 billion, which has even allowed Air Canada to take premium vacations. “Today the company is doing a lot of good,” says Vincent Morin.
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This contrasts with the industry's trend to lag behind in employment.
Since 2004, jobs in the financial sector in Quebec have increased by only 11%, compared to a growth of 27% in Canada, according to an analysis published by CIRANO in late August.
The situation appears to be getting worse, as job creation in Quebec has stagnated since 2009, while it has increased by more than 10% in all other major provinces.
Where is the problem?
Despite the enviable achievements of Quebec's financial institutions, many jobs are disappearing as a result of the digitization of service offerings and the modernization of computer platforms.
These changes accelerate the centralization of the workforce in headquarters, which especially benefits Toronto and harms regional centers, where maintenance of service points is no longer so essential.
"This is dead of attrition for the financial world! There are no new vacancies to fill. People are leaving and not being replaced," regrets Marc-André Soublière, first vice-president at TCC.
As more sophisticated, retirement plans are looking more outwardly to invest in new, alternative asset classes.
To give you an idea, the plans of Quebec companies, municipalities and universities grant external management mandates to the tune of about $ 80 billion. two-thirds of that amount is allocated to managers from outside the province, according to a study conducted in 2018 by the Institut de la statistique du Québec.
Rising capital. High-skilled jobs lost.
* * *  For its part, TCC was not afraid to tackle more complex strategies, it must be said that it has the critical mass, with 23 billion in a ctiva, making it the country's second largest corporate retirement plan, after Bimcor (Bell Canada) which has $ 25 billion.
A few years ago, Vincent Morin recalls calling the manager of a hedge fund in New York to discuss a deal he wanted to make internally. The specialist replied, "Ah, very, very good idea, I'll put it in my wallet!" "
He then said to himself," We pay someone in New York and we give them transaction ideas. Maybe we could do a little more research and do it ourselves, ”says Morin.
Today, TCC has $ 1.2 billion in assets in its hedge fund, making it one of the three largest in Canada. He now wants to offer his services all over the world. Two institutional clients, including a labor fund, have already given him a mandate.
At the same time, TCC took steps to create an insurance company that would allow it to guarantee its own pensions … and why not those of other retirement plans that want to reduce their risk?
The sky is the limit.