November 12, 2019 / 9:14 PM / a month ago

UPDATE 3-Canada pension fund Caisse CEO Sabia to quit earlier than planned

(Adds challenges facing CDPQ, former board member's comments)

By Nichola Saminather and Allison Lampert

TORONTO/MONTREAL, Nov 12 (Reuters) - Michael Sabia, president and chief executive of the Caisse de depot et placement du Quebec (CDPQ), Canada's second largest pension fund, will step down earlier than planned to take the helm of the University of Toronto's global affairs program, the fund and university said on Tuesday.

Sabia, 66, who served as the CDPQ's first non-Francophone CEO for 11 years, will leave in February 2020, the CDPQ said in a statement. He had been expected to remain until March 31, 2021.

The board of the CDPQ, which managed C$326.7 billion ($246.9 billion) at end of June, expects to conclude its search for Sabia's replacement at the beginning of 2020 with a successor approved by the government, according to the statement.

That successor will have to contend with some of CDPQ's challenging holdings, including a Greater Montreal area rapid transit system facing delays and cost overruns; the troubled SNC-Lavalin Group, of which Caisse is the biggest shareholder and which the fund expressed growing concern over in July; and Bombardier, whose transportation division is facing performance problems with its contracts in New York and Switzerland.

The Caisse, which invests on behalf of some 6 million workers and retirees in Canada's mostly French-speaking province of Quebec, has a nearly 30% stake in Bombardier's rail unit. Any number of potential candidates from across Canada, rather than just Quebec, could be in the running to succeed Sabia, according to Yvan Allaire, executive chair of the board at the Institute for Governance, and a former Caisse board member.

"It may well be that there’s a great push to have a woman CEO this time," Allaire said. "Certainly one would require a great deal of familiarity with all aspects of finance."

Under Sabia's leadership, Caisse produced 9.9% annualized returns over the past decade, and nearly tripled its assets, CDPQ said. The returns compare with 11.1% at the Canada Pension Plan Investment Board, the country's largest pension fund, and 10.1% at Ontario Teachers' Pension Plan, the third biggest.

Sabia "felt it was the right time to leave for a new challenge," Caisse spokesman Maxime Chagnon said by phone. "The Caisse is very strong now so it was a good moment for him."

Sabia's compensation in 2018 was C$3.8 million, compared with C$4.6 million for Mark Machin, his counterpart at the CPPIB and C$4.9 million for Ron Mock at Ontario Teachers.

He will become the director of the Munk School of Global Affairs & Public Policy at the University of Toronto, the university said.

$1 = 1.3231 Canadian dollars Reporting by Nichola Saminather and Alison Lampert; Additional reporting by Bharath Manjesh in Bengaluru Editing by Marguerita Choy and Tom Brown

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