Over the past 2 years, Credit Investments has continued to expand globally and now manages all of public and private credit investments, accounting for 12.4% or $40 billion of the Fund’s asset mix.
John Graham, Senior Managing Director and Global Head of Credit Investments at CPP Investments, is building a different kind of credit department. How different? One recent hire has a PhD in Aerospace Engineering. It’s not that Graham believes credit investing requires a deep understanding of aerospace – it’s that anyone who has achieved such an understanding is, by definition, smart, driven, and extremely quantitative. Those are the qualities Graham is looking for.
“We are always striving to make unbiased and objective decisions. I believe that being more data driven, being more quantitative is the way to do that,” Graham says. And he doesn’t want those skills sequestered in a center of excellence—he wants them embedded in the team. That’s why he has expanded the traditional hiring pool to include those from nontraditional backgrounds with extraordinary quantitative skills in every group.
Senior Managing Director & Global Head of Credit Investments
We are always striving to make unbiased and objective decisions. I believe that being more data driven, being more quantitative is the way to do that.
These analytical skills take time to develop and are often taught through formal higher-level education. “On the flip side, investing is an apprenticeship business and we can teach and train credit investing,” says Graham, who has, in fact, created an immersive three-week program to do just that for new hires from different disciplines. He says they can pick up the rest of what they need to know on the job.
For proof of concept, Graham doesn’t have to look any further than his own workstation. Before he joined CPP Investments 13 years ago, Graham was a scientist in an industrial research lab where he was putting his own PhD in physical chemistry to good use. CPP Investments has been a great fit. At the time, though, it didn’t necessarily feel like a sure thing. Graham was thriving in his career and had two small children at home. Taking a leap in a whole new direction, with all the attendant uncertainties, was something he wrestled with, eventually deciding finance was something he needed to try.
It’s not just the personnel roster that signals a new direction for Credit Investments. Graham likes to talk about the breadth of the mandate for his department. At many shops, credit investing means corporate bonds and loans. At CPP Investments, the team is expanding into the full panoply of credit classes.
For example, CPP Investments is now one of the world’s biggest and most recognized investors in pharmaceutical royalties, a discipline in which the firm uses its deep pockets and long-term view to buy the royalties on new drugs, which are often developed by non-profits, such as universities or small pharma companies. These are outfits that are optimized for research—not management of a drug that might be in the marketplace for decades. When the CPP Investments credit team steps in, the researchers get the funds to continue their work in drug discovery, while CPP Investments gets a long-term stream of income that is largely uncorrelated with the capital markets. Recently, for example, CPP Investments invested US$1.3 billion to acquire the royalties on Keytruda, an immunotherapy drug aimed at fighting cancer.
That mandate also allows Graham’s department to make direct investments into businesses and platforms that operate in the credit ecosystem.
With the size and global reach of the CPP Investments portfolio, direct investments help the credit team achieve scale. Direct investments also are sources of market intelligence and relationships. These investments include a majority stake in a sponsor backed middle market corporate lender and a real estate focused middle market lender.
Like everyone else during the pandemic, Graham has had to grapple with how to get the work done with his team working remotely. He says there has been some very positive and sometimes surprising outcomes but also some unexpected challenges. No doubt the pandemic has put extraordinary stress on everyone, especially the parents of young children. Graham continues to worry that team members are working longer hours and risk burning out.
To help relieve the pressure, the credit leadership team has strongly encouraged the team to take the time necessary to recharge even if that is a staycation at home in our new COVID world. Graham has made it a point to meet with every member of his team individually or in small groups, via video conference, to see for himself how everyone was holding up. The credit department has also been mindful of understanding the best times to engage colleagues, allowing them to block off time strictly for childcare or other family issues.
On the plus side, Graham has found some unexpected benefits in the now ubiquitous video conference. He says that in the past, there was a tendency for team members who dialed into a live meeting to feel like observers rather than participants. He says video conference is a great leveler, putting everyone on the same footing. “The common message I hear from teams is they’re probably closer than they’ve ever been. They probably have more collaboration and less of a Toronto vs New York or London mindset.” While some tasks are harder to do with dispersed teams, others have become easier. Post pandemic, he foresees more work at home days for his team.
As for what keeps Graham centered when the going gets tough, he credits his family, especially his wife Melissa. Back when he was agonizing about leaving his research career for a pension fund, it was his wife who told him over dinner in a Thai restaurant, “John, you’ll regret more not taking the job, than taking it and failing. Just do it.” Thank you, Melissa!