BCI Releases 2022-2023 Corporate Annual Report

A message from Gordon J. Fyfe, Chief Executive Officer / Chief Investment Officer

BCI’s latest fiscal year unfolded in an environment of heightened volatility and uncertainty, largely resulting from Russia’s February 2022 invasion of Ukraine. The outbreak of war in Eastern Europe gave rise to a confluence of risks that included runaway inflation, escalating interest rates, a banking crisis, and — for the first time in decades — significantly heightened geopolitical unrest. It is a testament to the exceptional calibre and commitment of our team, and their ability to adapt to abruptly changing circumstances, that we were able to skillfully navigate through the turbulence.

The market turmoil was, in fact, expected. I had been cautioning clients for the past year that more challenging times lay ahead, and we had taken steps to brace ourselves against the forecast headwinds. In terms of preparedness, BCI’s portfolio of diversified public and private market investments, most of which are actively managed in-house, allow a flexibility and responsiveness to changing market conditions that helped us deliver strong performance. While seeking out opportunities to leverage BCI’s competitive advantages, namely our ample liquidity and long-term investment horizon, to capture quality investments at fair prices, we intensified our focus on providing downside protection for clients’ assets through stringent risk management.

Performance Highlights

Although BCI is not immune to the prevailing market volatility — no investor is — our proactive approach to risk management was reflected in a resilient investment performance for the fiscal year, 3.5 per cent, compared to the benchmark result of 0.3 per cent. This 3.2 per cent outperformance added $4.6 billion in value for our pension plan clients and is the second year in a row we delivered our strongest-ever one-year relative return, an achievement I am delighted to recognize. However, given that our clients have a long-term view of things, it is important to not focus solely on short-term results. Accordingly, I should note that over the five-, 10-, 15- and 20-year return periods we also exceeded the benchmark returns, and delivered the actuarial required rate of returns our pension and insurance clients need to meet their future obligations.

With the chaos in public markets, our diversification into private assets again played an important role in driving BCI’s outperformance against key benchmarks. Private equity had an exceptionally active year, committing a record $9.8 billion through both direct investments and funds. Among noteworthy transactions, we acquired a significant minority stake in Authority Brands, a residential services platform with 15 brands that provide industry-leading residential and care-giving services from 1,900-plus locations throughout the United States and the world. BCI led this minority investment, investing alongside funds advised by an existing investment partner. We also made our largest direct, private equity commitment to date with Maxar Technologies, a global space technology and intelligence company whose customers include SiriusXM and NASA. This is an exciting opportunity which also involved an investment by our private debt team.

BCI’s infrastructure & renewable resources program coinvested in two ground-breaking businesses capable of accelerating the global green-energy transition: as part of a consortium, we acquired Reden Solar, which builds and operates solar power plants across Europe and Latin America; we also acquired a stake in Eku Energy, a global battery storage platform that is playing an important role in decarbonizing electricity grids.

Transactions such as these demonstrate the strong global network of investment partners BCI has built in recent years — stalwarts who stood by us during the pandemic and continue to steer some very good deals our way.

BCI’s gross assets under management reached $233.0 billion, as at March 31, 2023. BCI's funding program, which provides clients with access to policy leverage, has grown to nearly ($18 billion) in size, and played a significant role in our performance this fiscal year.

Access to leverage enables clients to increase the potential return by broadening their investment footprint, diversifying their exposure and increasing access to liquidity.

Performance Focused

Our proactive approach to risk management was reflected in a resilient investment performance for the fiscal year.

Clients First

BCI’s ‘Clients First’ value is the driving force behind all our investment and operational decision-making, and clients evidently appreciate how we do our utmost to help them build financially secure futures for their beneficiaries, challenging times notwithstanding.

We conduct client satisfaction surveys every two years, and our team received a first-quartile performance ranking in the latest assessment, compared to other home-grown and global asset managers serving the Canadian market. I am exceedingly pleased and proud of the level of confidence and high regard in which clients hold BCI — even during tough times such as the protracted COVID-19 pandemic, when clients and relationship managers had to adapt quickly to new ways of engagement. The positive results are a testament to living our values.

As the COVID-19 pandemic receded and in-person events resumed, we staged our first hybrid Investor Day in January 2023. It was a pleasure to address approximately 100 trustees and client representatives in person and online, and to reconnect with many people I had not seen since the outset of the pandemic. The event facilitated important discussions between clients and investment teams as a new calendar year began.

Advancing ESG

We advanced several significant measures on the environmental, social and governance (ESG) front this year. BCI’s ESG Governance Policy was revised by the Board of Directors working with management, and we released an updated version of our Climate Action Plan. As well, we further refined our Proxy Voting Guidelines to incorporate increased expectations of public companies with respect to ESG matters, including diversity and climate, and appointed our first global head of ESG.

Integrity

BCI is strongly committed to equity, diversity and inclusion (EDI), and has been a leading advocate for an increased role for women in investment management.

People and Culture

Crucially, we demonstrated BCI’s capacity to adapt to change with regard to talent and the work environment: after a near two-year absence from office-based work, I was delighted to welcome people back to the office while maintaining elements of flexibility through the adoption of a hybrid model, whereby most employees now operate on a three-days in office and two-days working from home schedule. Kudos to all the teams involved in facilitating this transition.

In keeping with our strategy to further extend BCI’s geographic reach and unlock new opportunities for diversification, fiscal 2023 saw the opening of an office in London, U.K., and the establishment of a foothold in Asia, along with a significant scaling up of the New York office.

We constantly seek top-tier talent and, despite being headquartered away from the major global investment hubs, BCI has built a world-class team of more than 700 employees. Still, given today’s exceedingly competitive environment with respect to human capital, we are focusing on talent risk management and retention. Working with our Board of Directors, we revised BCI’s Compensation Philosophy, including incentive elements, to bring them in line with current industry best practices. Other talent-related initiatives included the implementation of career pathing for team members and advancing succession planning in the senior ranks of the organization.

BCI is strongly committed to equity, diversity and inclusion (EDI), and has been a leading advocate for an increased role for women in investment management. Over the course of the past year, we demonstrated our resolve to “walk the talk” in that regard, promoting and recruiting several accomplished women to senior investment positions. I want to congratulate Jennifer Coulson, who spent the past decade at BCI assembling a world-class ESG team in public markets, on her new role as Senior Managing Director & Global Head, ESG. As well, I would like to formally welcome several outstanding newcomers to BCI, including: Lea Dubourg-Hrachovec, who will lead our London office as Managing Director; Rhonda Ramparas, Senior Managing Director and our first private equity hire in New York City; and first employee in India, Mumbai-based Helly Ajmera, who as Director & Head of India Investments will help grow our infrastructure & renewable resources footprint in Asia.

World Class

BCI has built a world-class team of more than 700 employees.

The Road Ahead

At this writing in early June, Canadian markets were digesting the Bank of Canada’s surprise announcement of a quarter-point increase in its benchmark interest rate to 4.75 per cent — the highest level since 2001 — and it was unclear whether or not other central bankers will attempt to stay the course on interest rates in order to rein in stubbornly high inflation. Given the stress in the global banking system, this could lead to a credit crunch and other forms of financial contagion. What remains clear is that we will continue seeing a more difficult landscape for investors. Nevertheless, BCI is capable of again rising to the challenge, and our clients can rely on us to be forthcoming with respect to whatever twists and turns the path forward takes.

I take pride in what we have accomplished in trying circumstances, and wish to express my appreciation to BCI’s Board of Directors, fellow members of the Executive Management Team and all the remarkable people throughout the corporation who share the credit for our success. Finally, thanks to our clients for the trust you place in BCI. We strive each day to maintain it.

Gordon J. Fyfe

Chief Executive Officer / Chief Investment Officer

Read the highlights of BCI's 2022-2023 Corporate Annual Report.