Measuring the value add of technology deployment is a question pension executives should be asking, says chief operating officer of CPP Investments Jon Webster. Amanda White double clicks on CPP’s technology strategy exploring a new user-centric focus on modular design so technology can evolve alongside investments; how in the not-too-distant future teams will include “non human” intelligence; and how to answer the question of value added.
CPP turned 25 years old this year with C$632 billion in assets, and its rapid growth is expected to continue with a projected AUM of C$3.6 trillion by 2050. This growth, combined with the fund’s complexity – it invests in 56 countries across public and private investments and has 328 global investment partners – means evolution is important across the organisation’s people, processes, thinking and investment implementation.
Jon Webster joined CPP in February 2023 to lead the fund’s technology, data, investment operations, security and corporate services functions, and describes his role as bringing together an integrated platform that serves colleagues with experiences they need to do their job well for CPP’s mandate. Those experiences are often technology-enabled and need to be safe and secure, and created through strategy execution capabilities.
CPP’s technology strategy is characterised by two differentiating factors. The fund is deliberately shifting to modular architecture and trying to be user centric.
Having technology that can evolve is one of the fund’s underlying design principles and one of the reasons a modular, or Lego brick, approach to technology is appropriate. The fund is very diverse in its approach to investments across teams, sectors, asset classes and geographies, so using different technology systems allows each investment area “degrees of freedom” to develop at its own pace and meet different needs.
“Evolvability means you can replace bits of it relatively quickly and effectively to respond to changing circumstance,” Webster says in an interview with Top1000funds.com.
“It’s one of the reasons we have chosen the modular approach, so we can very deliberately evolve the architecture in the spaces we need to.”
For example, Webster points how the different ways of looking at the world might evolve and so how scenario analysis around investment performance also needs to be a distinct module to evolve over time to meet the specific needs of its users.
In addition to having separate, modular, systems there also needs to be some organisational standard way to use the information. Webster says this comes in the form of an overlay of data products on the top of the tech systems, and it is what allows the fund to “liberate” the data and operate in an integrated way across the organisation where it is needed.
“How we record our positions is not going to change dramatically, it will still be an electronic ledger, there isn’t a lot of competitive advantage directly in a ledger,” he says.
“So for performance attribution, we are making it modular so we can replace and evolve. The most important thing with the ledger is they are simply integrated and the data sets that they make available in a consistent way across the organisation and accessible to everyone that needs it. In those cases, we are using a higher level of modularity and the idea of a data product that can be made available to the organisation for a variety of uses.”
The broad philosophy, Webster says, is that what CPP does is pretty stable over time, but how it does it changes. The modularity and the data products are the two mechanisms to reflect that.
The technology strategy is also focused on being very user centric. It’s where Webster, whose background is in digital transformation, is bringing in his experience working in consumer markets particularly banking where the architecture is far more responsive.
“I have a deep belief that the most important thing you can do with technology is to put it into the hands of people who can create some value with it,” Webster says. “You really do need to focus on user-centricity, testing and learning with users, experimenting what works and what will get adopted.”
He says the technology industry has developed an idea of product management, which is to treat technology like products to sell to users and meet the deep need of the user.
“It is something we are pushing heavily on, a product-oriented technology model,” he says.
“We have product owners in the investment departments which are directly integrated with the technology team, and [those individuals] are part of the technology department so we are consistent in how we build software; the security standards we apply; the design patterns we try to apply to software; and that has resulted in giving the right degrees of freedom to the users but that we are also building enterprise capabilities.”
To be useful technology has to be used
As elementary as it sounds, for technology to be useful it has to be used. For CPP, users are colleagues across all departments and Webster emphasises the need to develop technology that means something valuable to them day to day.
“Enterprise capability is super important,” he says.
“We are one fund and one integrated organisation. But what is important about the user perspective…is you have to take that overall enterprise perspective, and you do have to make sure your teams are connected to the everyday users, you need to be tapped into the users on the ground, where the work happens, and the local context of what they do.”
Webster says there are around 20 to 30 capabilities that are critical to make modular, including performance attribution, research management, knowledge management, integrated fund reporting and integrated risk reporting.
“I have found people in institutional investment to be hungry users of information, it’s a very data, information, knowledge-oriented culture,” he says.
“The last mile of investing for us sits in the hands of our investors but empowering them to make the decisions well and with the right quality of information is what the technology strategy is all about.”
Measuring the value add from technology
It is important but difficult to measure the value added by a technology deployment. For Webster, whose career is specialising in technology enabled transformations, it’s a question executives should be asking.
“Coming to the value question is very important,” he says.
He says that as AI grows and becomes more embedded into organisational decision making, it will start facing questions about the value it adds. For pension funds, that could be answered by the fundamental metric of basis points.
“AI is fascinating, it will restructure how thinking gets done, how work gets done, and organisational set ups,” Webster says.
“That will cause that question to be asked more pointedly. For some of these capabilities you have to boost them in a way to compound the advantage and need to give them sufficient space to demonstrate efficacy.”
For example, if knowledge management can be available at an investor’s fingertips, how do you put a price on that? But he suggests perhaps a more valuable measure is the compounding effect of that over time.
“Bootstrap it for a period of time then ask if you are seeing the compounding effect of it, and then [ask] how do we value it?” he says. It could be a returns-based value, but it could also be a decision quality, or decision throughput measurement.
The transformational power of AI
At the moment consumers are mostly using one-dimensional technology, like search engines, asking questions and producing results.
But Webster believes that this will develop and shift to “designing for dialogue”.
In other words, technology that enables a conversation with a different type of intelligence will become another useful agent in a topic that matters to the organisation.
“Getting people familiar and fluent with that is really important,” he says, stressing the importance of everyone in the organisation using tools like Copilot and versions of ChatGPT.
“This is legitimately useful in the five- to 50-minute tasks and the nature of how you do your work. It’s building the fluency of designing for dialogue.”
Like many investors with large complex allocations, CPP receives a vast number of documents from partners, in various formats, particularly in private investments where data is less standardised.
Historically, reading something about private equity funds felt different to reading an external portfolio management documentation. Enter ChatGPT with the origin of a general-purpose transformer which is basically about the translation of languages.
“We are starting to see that change,” he says. “Because the tech is language-agnostic, problems can be more solvable in things like investment operations because it understands the dialects of business and the languages of investment.”
Future uses of AI
Webster says with the use of AI there will be a “levelling up” of what people couldn’t do before, forcing people to be clear on their edge and value add.
“The bar will go up and up,” he says, adding that investors need to take a broader perspective and understand that all professional services where thinking is one of the primary products will be disrupted in the sense of how work gets done.
“There is already a diverse set of agents bringing together a diverse set of skills,” Webster says.
“In the future they will be non-human and human working together. We are just early in the cycle. Any of us interact with Google, but how we interact is simple. We don’t say ‘hey Google I’m thinking about this complicated world puzzle and can you help me in how to approach that?’, and then have a dialogue. That is not a thing yet embedded in the interaction.”
Webster says that in the near term, say one to two years, your job could be replaced by someone using AI effectively. He says there is already a set of people who are more effective because they have embraced the idea of dialoguing with the current technology, and they set aside the notion it can make mistakes because they are in a dialogue with it.
“They see the technology as a smart apprentice that makes mistakes,” Webster says.
“Beyond that, we move into prediction territory, but it will probably be different to that in the future, and more likely to be another set of intelligent agents in a broader dialogue. Things like AI will be an additional team member on your team.”
Connecting the purpose of the organisation and the ability to legitimately make a difference is one of the reasons Webster says he likes working at CPP.
“We have a real sense here, a direct connection between what we were set up to do and the impact on the lives of 22 million Canadians, that is very motivating for our colleagues,” he says.
Also, he says, because institutional investors are not huge organisations there is the ability to make real progress.
“You are only two to three steps from where the work gets done, and can understand the context and frictions better, and what it means for the platform,” he says.
“There is a connection between building a platform for people to do their best work, and the impact of that platform then on them.”
Because the world is becoming more complex, organisations need to bring together diverse expertise to solve problems, with employees needing to step outside of their silos. That is not straightforward for organisations to do.
“In investments, cross-sectional teams have always been there, and it’s a great platform for building that,” Webster says.
“This plays back to the AI point. In the future those cross functional teams won’t just be humans, but other forms of intelligence being involved in the decision.”
