Travelling The Road To 'Pension Fund Capitalism': A Progress Report

 “We have seen that pension fund socialism will create new problems and demand new policies. It is creating a new ‘interest group’, and through their pension funds this interest group can organize. These institutions will represent the concerns and priorities of the new center of population and social gravity: older people in retirement and older employees to whom retirement provisions are becoming increasingly important.”

Peter Drucker“The Unseen Revolution”, 1976

 “The Portfolio Value Creation (PVC) group is responsible for driving value-creation across CPP Investments’ global portfolio of material direct equity investments. We work closely with deal teams, portfolio company managements, and deal partners to create value within portfolio companies. Working across all sectors, geographies, and deal phases, PVC helps with diligence, enhances governance, actively monitors portfolio companies, drives organizational change, and ensures transfer of best practices across all areas of CPP Investments’ asset management and value-creation activities.”

CPP Investments, 2024

 A Confession

This Letter starts with a confession. Peter Drucker used the term ‘Pension Fund Socialism’ in his 1976 book “The Unseen Revolution”. Note that it became ‘Pension Fund Capitalism’ in the title of this Letter. Why make the change from ‘socialism’ to ‘capitalism’ here? Because properly structured, institutions managing pools of retirement savings are not owned and managed ‘by the community as a whole’ as ‘socialism’ requires. Instead, as Drucker actually set out in his book, pension funds should be arms-length entities legally bound to create value for clearly defined groups of stakeholders. Arguably, this makes pension funds the capitalist tools required to effectively invest retirement savings in the best economic interests of those stakeholders. To be clear, we write here of the 'enlightened' version of capitalism, not its nasty 'winner take all' version.