[REPLAY] Mario Therrien – The Canadian Pension Model (Capital Allocators, EP.12)

Active Management

Mario Therrien, Senior Vice President at CDP, highlights the evolution and merits of active management within the Canadian pension model. He shares his experience in building a hedge fund and managing external portfolios, emphasizing the importance of selecting disciplined, smart, and creative managers who are generous in sharing their experiences. Therrien notes the challenges of active management in liquid asset classes due to technological advancements and the increasing difficulty in outperforming the market.

We feel that active management in the more liquid assets has become more and more difficult. And we see that, we see the impact of AI, we see the impact of the quantitative process.

--- Mario Therrien

Despite these challenges, he believes in the potential of combining quantitative and fundamental approaches for future success 1 2.

   

Market Dynamics

Therrien explores the current market dynamics and their influence on investment strategies, particularly the debate between active and passive investing. He acknowledges the complexities of managing a large portfolio in a market where asset prices are high and the potential for a downturn looms. Therrien emphasizes the importance of investing in great businesses and understanding portfolio concentrations to navigate these challenges.

Investing more money in illiquid assets also mitigates sort of the optical risk, if you like, because, you know, these assets are not revalued every day.

--- Mario Therrien

He also highlights the role of illiquid assets in reducing perceived risk, as they are not subject to daily revaluation, thus providing a buffer against market volatility 2 3.