By Lauren Bailey
For the past 12 years, Marc Gauthier, corporate treasurer and chief investment officer of the $1.1B Concordia University, has been crafting an asset allocation strategy that is not only risk adverse, it bakes in purpose and intentionality.
The Montreal, Quebec-based university manages two funds — its defined benefit pension plan and its Intergenerational Fund (formerly its Foundation). The objective of most allocators is usually to keep their portfolios relative to well-known financial market benchmarks. But when the S&P 500 is down, Gauthier doesn’t see the value in continuing to use that type of headline risk to guide investment decisions. Instead, he’s opted to design a strategy guided by funding objective.
“From there, we have investment programs and then we have strategies,” he explained. “So, I would never measure how much I have in public equity [or] in debt and so on. It’s all respective to our objectives and investment programs. We have indicators and targets, but it’s really 100% absolute driven. I’ve got zero beta, and so you get the different movement.”
Pension plan: Targeting the end zone
Anyone who knows a thing or two about football understands the distinct aspects that offense, defense and special teams strategies each bring to a game. Gauthier employs those strategies with the pension plan’s three main allocation classes — capital preservation, growth, and diversification.
The key lies in the percentage weights of each allocation, he adds, noting at one point his capital preservation comprised 50% of the portfolio but has since been reduced to roughly 45%. People often think adopting a capital preservation strategy is highly dependent on bonds, but to the contrary, the plan has very little exposure to these vehicles.
“It’s all multi-strats, dynamic unconstraint mandates. Some people call it [a] hedge fund. I think it’s broader than a hedge fund. The idea is these are very skilled trade-based allocations that are very dynamic [and] which are all focused first to protect capital but with the skill to pick up on the upside when they need to.”
Staying true to his affinity for sports, Gauthier dives back into another game analogy — this time using baseball to describe his growth strategy. “You often hear people saying, oh, I want to hit singles or doubles. No, growth is my triples, my home runs. It’s really where we’re looking for the strong, [long balls]. This is where I seek to take on risk for returns.”
He employs a private market approach through venture capital, using equities as a proxy to maintain coverage.
“So, in capital preservation, it’s all about whether it’s a multi-strategy of funds of funds or multi-manager platform, and the growth is either Asia or North America because I bucket by main economic regions over time.”
His specialty team, or diversification, is an idiosyncratic strategy with four themes — life sciences, real estate, natural resources, and private markets, including alternatives, private equity, and private credit.
“It could be a [general partner] stake. It could be financing of [limited partners] — not investing in LPs —those who need help, financing liquidity. It could be financing litigation, which is a form of credit. For life sciences, I call it longevity-driven investment 3.0, as it ties into our longevity risk management framework we have for the whole of the pension plan. . . . You have that connectivity, and I add alternative private equity. But the idea there is, they all are very idiosyncratic. They have no correlation to the financial market.”
Intergenerational fund: A purpose-driven approach
Having started his career at Concordia while a student more than 35 years ago, Gauthier understands the interconnectivity within the university’s community and the importance of striking a balance that appeals to the needs of its various stakeholders.
“Our university cannot afford cost instability [and] cost variability, especially in today’s context, where the university sector has been disrupted and now has an affordability issue. When you take that context into mind, then you realize . . . it’s now [necessary] to create a framework where cost and affordability is primary, along with the whole notion of intergenerational equity.”
He says the spirit of the intergenerational fund is to use capital for action — not just how much it offset in terms of risk, but its impact. “It’s not just about whether we reduced our carbon footprint. It’s about whether we addressed a specific action, mostly through innovation.”
When the university decided it would become 100% sustainable by 2025, Gauthier had to rethink the fund’s approach to portfolio construction, creating an allocation framework focused on intentionality. “Every capital now is allocated by purpose, intentionality. It’s either for the planet, for people, or for a sustainable economy. And within that are sub-sustainable classes.”
Concordia’s diversification mix for the Intergenerational Fund is guided by the United Nations Sustainable Development Group’s 17 Goals. Gauthier calls this integrated framework “three-dimensional governance” — board governance, university governance, and student and employees governance. “So, it’s all vocation. The team is so proud of it because all capital has an intention [and] an action towards solving or supporting long-term issues.”
As of fiscal year 2023-24, Concordia allocates 11% of the Intergenerational Fund to Africa as part of an impact investment approach. “At this stage, it’s more lending in order to create platforms, jobs for youth and women. Our efforts there are to sort of [help] increase the pace of the economy in order for [the region] to keep pace with the market.”
While it’s clear Africa’s demographic is outpacing its economy, he believes it has tremendous growth potential over the mid to long term. He notes that China has been ramping up investments in the region. “I think there’s a movement at some point where Africa can really become more of a solid continent with all 55 countries. Because if all 55 countries in Africa will be together as one region, they’ll, right now, be the third-largest economy. . . . I suppose we’ll eventually see them form a union.”
Within the next decade, Africa will encompass 40% of the world’s youth, he says, pointing out that it will present a unique advantage for foreign investors.
Africa can be self sustaining if the region works cohesively, says Gauthier, noting the countries import a lot of products they don’t need. Indeed, it is rich in critical minerals and materials, and with the establishment of the African Continental Free Trade Area in 2018, he believes the region is well-positioned to realize economic growth.
“They can be self sustaining. . . . They don’t have an inflation problem. They actually are not that indebted. If they can just simply work together to really move forward as a global leader. It’s following what India is doing from an education perspective.”
The remaining portions of the total fund portfolio is mainly in the U.S. (38%), followed by Canada (25%), Asia (12%), Latin America (10%) and Europe (4%).
The lion’s share of the fund’s allocations are directed toward the education sector (37.84%).
Another impact allocation under the intergenerational fund is Concordia’s “writer investment,” which provides lending capital to students who clearly have the ability to go university but cannot afford to do so. While its investments are mostly in Canada, Gauthier considers it a good example of the potential that can be unlocked if individuals are just given access to education.
The remaining sector allocations are sustainable agriculture and forestry (24.66%), energy (19.21%), transportation (9.13%), circular economy (5.18%), and cleantech (4.86%).
Concordia’s transformation toward its 100% sustainability objective is still ongoing with a phase four expected in 2025 and a fifth phase in 2026.
