CFA Society Toronto’s 2024 Pension Conference offered a veritable issues smorgasbord. From the standard “big picture” market outlook and perennial topics like emerging markets and fixed income to topical sessions on climate change and a heartfelt discussion on neurodiversity in the workplace, the conference had it all!

Two hundred pension industry attendees from Toronto and further afield made it to the new waterfront digs of the Toronto Region Board of Trade for the full-day event in April.

Recession? Or not?

Kicking off over breakfast was Tom Salopek, Head of Cross-Asset Strategy at J.P. Morgan. He noted that investors have jumped many times between soft landing and high-for-longer expectations, complicating the asset class decision. Equities are priced for strong forward earnings expectations despite prospects of an economic slowdown, while euphoria about big US technology stocks has produced a worrisome 50-year high in market concentration. For bonds, the asset allocation decision is easier, since bond yields should drop whether there’s a slowdown or recession. Salopek attributed the surprising longevity of the business cycle to corporate cash cushions, a strong job market, and blunted monetary policy transmission as interest expenses fell even as interest rates rose.

China vs. India

The Emerging Markets session focused on the relative merits of China and India. Regina Chi, Vice President and Portfolio Manager at AGF Investments, argued that the Chinese economy was showing “green shoots” and that the stock market had bottomed out.

Pooja Malik, CFA, Founding Partner at Nipun Capital, called India “the new China.” Per capita, incomes and demographics are where China’s were 15 years ago. Structural demand from local buyers has been driving up Indian equities, she said.

Matthew Gertken, Chief Geopolitical Strategist at BCA Research, was more sanguine about India than China. He saw structural reform in India winning foreign investor confidence. On China, he perceived that President Xi Jinping’s focus on political control would trump policies needed to increase household consumption or energize private entrepreneurship. 

Fixed income’s time to shine

The day featured sessions on both public and private fixed income. All three public market panellists correctly predicted the Bank of Canada would cut interest rates in 2024 (the first cut came on June 5). Although uncertainty on inflation remains, they agreed that fixed income had become more attractive in the wake of central bank tightening. With the potential to add further diversification, the audience heard arguments for segments such as high yield and securitized debt as potential components of a pension asset growth portfolio.

The panellists on private credit also viewed the market outlook as promising. They said there is a lot of pent-up demand for the asset class and assets waiting for the right price to come to market, which remains concentrated in North America. Although investors give up liquidity with the asset class, Bhoumik Rokadia, Managing Director at Antares Capital, said it has been shown to offer consistent returns and a hedge against inflation. Also, because private credit involves a partnership with the deal’s private equity sponsors, recovery rates compare favourably to similar asset classes because the two sides collaborate on constructive solutions when issues arise, said Maila Chuong, Director, Senior Credit Private Markets at Manulife Investment Management.

Private credit is becoming a more mainstream asset class, the panellists said. In the past five years, large institutional investors have built multi-manager core exposures to private credit. Other approaches include co-investment as a way to dilute fee costs and participation in the growing secondaries market as a way to manage duration and build relationships with general partners.

The case for “degrowth”

Stepping away from the traditional investment focus, the post-lunch session featured Peter Victor, Professor Emeritus and Senior Scholar at Toronto’s York University. He argued that “degrowth” may be the response to the environmental and climate crises. Degrowth means the actual shrinking of the physical size of the economy, as measured by the extraction and consumption of natural resources and dumping of waste into the environment. Victor said that current such activity is 1.7 times the earth’s capacity. Six of nine identified planetary boundaries to sustainable human existence have already been breached, including freshwater capacity and biosphere integrity. Investors face a greater range and severity of risks as a result, requiring more comprehensive risk assessments and more holistic investment goals that also consider environmental impact, he concluded.

Making space for neurodiversity

In the day’s last session, Marlene Puffer, CFA, Chief Investment Officer at Alberta Investment Management Corp., argued for a constructive approach to neurodiversity in the workplace. Puffer said neurodiversity is widespread, manifesting both in well-known ways like attention deficit disorder or autism, and less well-known ways like dyspraxia (a motor skill impairment). Drawing on her experience as a neurodiverse individual and as the mother of neurodiverse children, she urged the audience to be thoughtful when evaluating neurodiverse individuals in job interviews and employee evaluations. Some traits traditionally valued in corporate environments (like maintaining eye contact or ease in social situations) may, in fact, have little to do with competence in certain jobs. Neurodiversity can also bring traits of value to investment management, like superior pattern recognition, creativity, and an ability to focus intensely and think outside the box, Puffer said.

The strong attendance at the networking session at the end of the day signaled that greater Toronto’s pension community found this 18th iteration of the conference a highly valuable event.