There are two things you can count on when the Canada Pension Plan Investment Board releases its annual report. The first is that CPP Investments will boast about how well it does in the ranking of public pension fund managers compiled by consulting and data firm Global SWF. This year, chief executive John Graham guided his fund to second place, behind only Sweden’s AP7.

The second is a broadside from newspaper columnist Andrew Coyne, who is convinced the $6.8 million that Graham was paid last fiscal year to actively manage nearly $800 billion in assets is a colossal waste of money. In this year’s harangue, Coyne said the billions that the fund’s board has approved to pay the salaries of a “bloated” operation in the “fruitless quest to beat the market—in fact, to deliver returns that substantially underperform what could have been achieved by a passive investment strategy, at a fraction of the cost—is nothing short of a massive public policy debacle.”

To this, Coyne attached a wish: “Maybe some day the Canadian media might even begin to take notice.”

So the spectrum of opinions about CPP Investments is wide. The fund should probably try harder to narrow it. The Bank of Canada’s recent experience with the public’s anger over inflation shows why. 

Graham’s approach to communications is to do a year’s worth of interviews on the day he releases his annual report, and then mostly disappear from public view for another 11 months. For two years in a row, I’ve “dutifully” (Coyne’s word) let Graham have his say without asking him why he deserves a multimillion-dollar salary when “monkeys” (Coyne again) could beat his performance by mirroring an index of global stocks and bonds. 

We should probably wait for the AI bubble to burst before we entrust one of the world’s better public pension systems to passive asset management. Graham isn’t trying to “beat the market” per se; he’s trying to earn better returns than could be had by simply investing our CPP contributions in bonds, while replicating the safety of AAA-rated sovereign debt. Monkeys would have a harder time executing that mission.   

Still, I think Graham could learn from the Bank of Canada by recognizing that there’s a correlation between credibility and the time you spend talking to the people you serve. 

Central bankers have learned this the hard way. There are lots of people—many of them smart—who think monetary policy should be guided by the price of gold, the money supply or some mathematical equation that would prevent overpaid humans from debasing the currency and tempting inflation. The theory might be sound, but my reading of history is that few societies have the stomach for the trade-offs that come with a rigid commitment to zero inflation. Appointing humans to hit a flexible inflation target is a compromise between the perfect world imagined by Bitcoin enthusiasts and gold bugs, and the one we inhabit. 

But the critics are always ready to pounce. The Bank of Canada was coasting on its reputation when forces beyond its control caused inflation to surge, forcing it to jack up interest rates in the aftermath of the COVID-19 pandemic. Out of nowhere, an ascendent politician made hay by threatening to fire governor Tiff Macklem. The central bank countered by making Macklem and other officials more available. The vitriol faded. That ascendant politician lost the election.  

The more you talk, the more you demystify what you’re doing. Like every big institutional investor, CPP Investments got tripped up this year by private equity. I asked Graham why an asset class that was all the rage has become such a money-loser. I’m going to relay the back-and-forth because it pulls back the curtain on how Canada’s most important investor thinks about his job. 

“The way I think about private equity, there’s a stock and a flow,” Graham said. That is, the strategy involves what you’ve bought and what comes up for sale. CPP Investments isn’t collecting companies, it’s seeking a certain return. Once it makes that return, it’s ready to sell. But getting that price has been hard because the uncertainty related to tariffs, inflation, geopolitics and (especially) artificial intelligence has interrupted the trajectories of so many companies. 

A tougher market has interrupted the flow, so private equity returns will be lower than expected until CPP Investments gets rid of some of its stock. The portfolio is “a little bit too aged right now,” said Graham, highlighting the sale of multiple assets to Blackstone and Ardian this month for $4 billion as an example of managing the stock. 

“We sold it, we think at a good price,” he said. “I’m sure Blackstone and Ardian think it’s a good price. We think we have better uses of that capital going forward.” 

I made the mistake of thinking Graham meant he was pressing pause on private equity. “Not at all,” he said. “The mistake is to go into a holding pattern, because you shut off the flow and the flow is actually pretty attractive. What you have to do is actively manage the stock.”

This is where I learned something about Graham’s approach to active management. There’s no rule that says you have to “turn” a portfolio, as he described it. But he believes that a good buyer must also be a good seller. “If all you do is buy assets, you’re only getting one-way signals from the market,” he said. “Buying and selling is a skill that investors need to have.”

Graham added: “We’re a long-term investor and we have the right to hold an asset forever, but not the obligation.”  

That anecdote from our conversation might only further persuade critics such as Coyne that active management is the world’s most costly form of busywork. And maybe that’s true. But you can narrow a trust deficit by letting people know that you’re doing your best. Graham would benefit from doing it more often. 

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.