Proxy firm ownership change

Ontario Teachers’ Pension Plan (Teachers’) announced on Wednesday 28 August that it had sold 20% of its ownership in proxy advisory firm Glass, Lewis & Co. (known in Australia as CGI Glass Lewis) to Alberta Investment Management Corporation (AIMCo). Terms of the transaction are not being disclosed.

With $129.5 billion in net assets as of December 31, 2012, the Ontario Teachers’ Pension Plan is the largest single-profession pension plan in Canada. It invests the pension fund’s assets and administers the pensions of 303,000 active and retired teachers in Ontario. Teachers’ has been an active investor in Australia.

Teachers’ acquired Glass Lewis in 2007, and has indicated that the company operates independently as an indirect wholly-owned subsidiary. While we have noted before that pension funds seem to be the natural owners of proxy firms, this does not mean there are not conflicts of interest, particularly when the fund itself is an active investor. However, we note that most proxy advisory firms suffer from the potential for conflicts of interest.

Teachers’ indicated that Glass Lewis has delivered strong revenue and client growth since it acquired the firm, and gave no reason for selling it other than that a new owner can bring “different perspectives” to the proxy firm’s operations.

AIMCo was established on 1 January 2008 with a mandate to provide superior long-term investment returns for 27 Province of Alberta pension, endowment and government funds. It is one of Canada’s largest and most diversified institutional investment managers, with assets under management in excess of $70 billion.

Like Teachers’, AIMCo is expanding its global private equity investments with a focus on direct transactions. The diversification in ownership helps to dilute the potential for conflicts of interest.

© Guerdon Associates 2024
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