It’s unusual to see advertisements with nothing concrete to sell.
But that’s precisely what the Canada Pension Plan Investment Board is rolling out with a new campaign that launches on Wednesday. The fund wants to connect with more Canadians, starting with internet advertisements and establishing a presence on Facebook since the beginning of a multiyear marketing program.
The option to invest in advertising might seem a strange one for a company that doesn’t appear to have to build brand loyalty: the CPPIB has a captive investor base because participation payments are compulsory for working Canadians and set at fixed rates with no possibility for redemptions.
However, the board, that’s the largest pension fund in the nation and oversees the Canada Pension Plan’s $328.2-billion portfolio, sees benefits to describing its operations and establishing its reputation before the next market downturn.
“The fact they’re made to save with us that they can not take out their money — isn’t a reason to not work quite tough to keep their trust,” said Michel Leduc, international head of public affairs and communications in CPPIB. “Especially if you are a public association with a mandate which eventually will become one third of the typical individual’s retirement savings.”
The fund is fighting the perception that it’s unstable. Currently, a vast majority of Canadians — 64 percent — aren’t convinced that the CPP will be about to pay out benefits when they retire, according to research commissioned by the board. This polling also indicates that many Canadians don’t have a great comprehension of what CPPIB does.
“Those two together is worrisome to us,” Mr. Leduc said. “We take the view … that the opportunity to build your reputation is not in a catastrophe.” The fund will watch for signs that this perception is changing as evidence of the success of outreach efforts. “Building and maintaining confidence is essential for our charter — just as any other financial institution must care about the confidence and trust of the clients.”
The fund is also attempting to get out ahead of possible losses that could shake public opinion. CPPIB is making changes to its investment risk profile, which is incorporating a measure of instability to its own returns. A few years back, CPPIB management decided that the fund could withstand more volatility in its investment portfolio due to its size, the certainty of donations from working Canadians and the long term nature of the CPP fund.
The CPPIB concluded that the plan should make higher returns for pensioners from the long-run. That would permit the fund’s overseers to reduce contribution rates, raise paid rewards or merely safeguard the strategy against potential unknown forces.
However, that approach also means CPPIB hopes to take massive losses in some years because of its exposure to equities and other investments that are similar.
“We all know that one year at 10 we’ll lose 12 percent,” Mr. Leduc said of the fund’s returns, stressing that this is part of this plan, but it might result in negative headlines.
Fund officials believe investment yields will continue to be the most visible risk factor for the CPP, even as changes to demographics, fertility rates, immigration and wages could have a bigger effect on the program’s growth and stability in the long term.
CPPIB is concerned that confidence and trust could take the biggest hit among risk-averse millennials when the next recession hits. It next phase of marketing efforts, in 2018, will be focused on the millennial cohort.
The first round of ads will feature mosaic-like contours somewhat reminiscent of the famous 1989 British Airways effort that had people dressed in a variety of colors coming together to form the shape of a grinning face when seen from the air. The pension fund will also establish a new site and a Facebook page to socialize with any of the 20 million subscribers and beneficiaries that might want to weigh in on investments or ask questions about how in which the fund operates.
Other companies and organizations have made use of “brand building” advertisements with no explicit sales pitch. It is a part of a spectrum of marketing designed to establish recognition of a new or even goodwill toward it in the minds of customers. The national and provincial governments regularly participate in this sort of advertising, supposedly to spread the message about your tax dollars at work — although occasionally .
The CPPIB, which functions as a Crown corporation at arm’s length from the government, currently has public reporting and outreach activities, including annual meetings in each state and reporting quarterly financial results. Mr. Leduc said connecting with Canadians digitally is a more updated interpretation of public accountability expectations set out in the act which established the fund. The fund hasn’t yet decided how much extra it will need in its communications and advertising budget for the effort.