Welcome to this week’s Rational Reminded Podcast! Today we’re diving into the recent CPPIB report that portrays actively managed funds in the most optimistic light. But before you trade in your index funds, we look at the methodologies and calculations employed by the report and show why there are a number of issues with their findings. Benjamin shares his proposal for an alternative analysis that employs a more risk appropriate benchmark, and we discuss why the report can be seriously misguiding. We also talk about the transitional issues that have result from MB Financial being taken over by Scotiabank and why some MB Financial clients have not been too pleased with it all. We tackle the issue of value versus growth stocks and look at a number of research papers that could explain the developments that have taken place in this regard. Nearing retirement and unsure when to take your CPP? Be sure to join us to find the answer to this complex question! 


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Key Points From This Episode:

  • The positive report about the active management strategy of the CPPIB. [0:01:19.0]
  • Why there is a red flag about the calculations done for this report. [0:03:19.0]
  • Benjamin’s alternative analysis and how he built up a more risk appropriate benchmark. [0:05:43.0]
  • The problem of CPP comparing a relatively safe portfolio with a much higher risk one. [0:09:02.0]
  • CPPIB’s argument for why they are investing in illiquid asset classes. [0:11:31.0]
  • A few repercussions of MD Financial being taken over by Scotiabank. [0:16:16.0]
  • Does value still make sense? Looking at the data of value relative to growth. [0:19:45.0] 
  • An overview of three research papers on on the overreaction hypothesis. [0:25:10.0]
  • The complex question of when to take your CPP and when it’s better to wait. [0:33:27.0]
  • And much more!



“CPP is comparing a relatively liquid and safe 70/30 traditional stock bond portfolio to a much riskier in different ways portfolio that has all these exotic asset classes in it.” — @benjaminwfelix [0:09:02]

“That’s no good, going and telling people look, active management does work, meanwhile, the benchmarking is in my opinion way off.” — @benjaminwfelix [0:12:49]

“There are definitely some tricks and snags that can be pretty tough to understand when it comes to when to take CPP.” — @benjaminwfelix [0:40:22]

Links From Today’s Episode:

Rational Reminder Website — https://rationalreminder.ca/

Scotiabank — https://www.scotiabank.com/global/en/global-site.html

Canada Pension Plan Investment Board — http://www.cppib.com/en/

Preet Banerjee on Twitter — https://twitter.com/preetbanerjee

Morningstar Direct — https://direct.morningstar.com/framework/login?redirectUrl=/framework

Andrew Coyne on Twitter — https://twitter.com/acoyne?ref_src

NACUBO — https://www.nacubo.org/

MD Financial Management — https://mdm.ca/md-wealth-management

Jarislowsky Fraser — https://www.jflglobal.com/en/

QTrade — https://www.qtrade.ca/

Richard Thaler on Twitter — https://twitter.com/R_Thaler


Download the transcript of this episode here: Rational Reminder Podcast – EP.52 – Transcript