Henri-Paul Rousseau leaving top job at the Caisse for Power Corp.

By Ross Marowits, The Canadian Press

MONTREAL - The head of Canada's largest pension fund manager and one of Quebec's most influential figures is joining another pillar of the province's business community.

Henri-Paul Rousseau said Friday he will leave the Caisse de depot et placement du Quebec in a few months to become vice-chairman of Power Corp. of Canada (TSX: POW.TO) next January.

The move, virtually across the street in Old Montreal, marks Rousseau's return to the private sector, where he last served as CEO of the Laurentian Bank (TSX: LB.TO) since 1994.

Since joining the Caisse in September 2002, Rousseau has brought stability and presided over a doubling of its assets and broadening its investment strategy.

The Caisse, which invests money earned by Quebec's public sector workers, has $155 billion under management.

Quebec Finance Minister Monique Jerome-Forget tried in vain to convince Rousseau to change his decision when they met on Thursday.

"Once you've made such a decision, I don't think it's the minister of finance that's going to make you decide to change your mind," Jerome-Forget said.

She called Rousseau's departure very sad personally and for the government.

"Even within the last year with the asset-backed commercial paper, his results were good," she said, noting the results last year were better than rival Ontario Teachers' Pension Plan.

Rousseau took the helm of the Caisse as North American stock markets were beginning to recover from the impact of the 9-11 terrorist attacks in the United States and the technology sector meltdown that began in 2000.

He leaves as debt markets appear to be on the mend from a crisis that spread throughout the financial system after the U.S. subprime mortgage business collapsed last year as default rates among high-risk borrowers soared. The contagion eventually spread to the broader financial sector in the United States and elsewhere, including Canada.

Among the casualties of the credit crunch has been more than $32 billion of Canadian non-bank asset-backed commercial paper that has been frozen since last August. Much of the ABCP - a form of debt that had been considered a relatively safe, short-term investment backed by assets such as credit card receivables, car payments and mostly Canadian mortgages - is held by the Caisse.

Caisse chairman Pierre Brunet said Rousseau's departure was unexpected.

"Everyone was very satisfied with the way Mr. Rousseau led the Caisse," he said in an interview. "The board, the managers, the employees, the government, everyone thought that he would probably stick around forever."

Brunet praised Rousseau's leadership during the ABCP crisis, which had largely been unforeseen until it erupted in August 2007 after investors began to fear some of it was tainted with defaulted U.S. subprime mortgages.

"He played a decisive role in avoiding the disorderly liquidation of quality assets, which would have affected not only the Caisse's portfolio but the entire Canadian economy as well. Many stakeholders from the Canadian and international financial industry witnessed this leadership first hand," Brunet said.

Finance Minister Jim Flaherty, who met with his provincial counterparts in Montreal on Friday, agreed Rousseau has played a major role in trying to resolve the credit crunch in Canada.

"He has been a very important participant in seeking a private sector resolution to the non-bank asset backed commercial paper (problem) that seems to be moving towards a successful conclusion," Flaherty told a news conference after the meeting.

Rousseau said it was the right time for him to return to the private sector.

"Since the Caisse's new incorporating act, adopted in 2004, sets the president and chief executive officer's mandate at five years, the time was also conducive to a change in management, particularly since the next six months will be devoted to drafting the organization's 2009-2011 strategic plan," Rousseau said.

"As for me, at age 60, this is the right time to take up a new challenge in the private sector."

Former Quebec premier Bernard Landry, who appointed Rousseau to the Caisse, said he was also surprised by his decision to quit.

"He probably faced the most complicated period in the modern history of the Caisse," he said referring to ABCP. "Not only did he manage the Caisse well, but he guided a settlement of the crisis. He inspired the solution proposed to limit the damage."

The Parti Quebecois urged the government not to name a successor until the Caisse's mission is debated in the legislature.

Rousseau will join the boards of both Power Financial Corp. (TSX: PWF.TO) and its parent Power Corp. as vice-chairman as of January 2009. In the meantime, he will remain as an adviser to the Caisse's board officers until Aug. 31.

Chief investment officer Richard Guay will assume Rousseau's responsibilities on an interim basis until a new president and chief executive officer has been appointed. Guay joined the Caisse in 1995 and has been chief investment officer since 2006.

Rousseau joined the Caisse from the banking sector. Before that he worked in the insurance business, at the National Bank of Canada (TSX: NA.TO) and had been an economics professor at the Universite du Quebec a Montreal and at Laval University in Quebec City.

Power is controlled by Montreal businessman Paul Desmarais. The company in turn controls Power Financial, Great-West Life, the Investors Group and Mackenzie mutual funds businesses and some of Quebec's biggest newspapers. Outside of Canada, it also holds big investments in Europe and the United States.

Power also has a reputation as a company with strong ties to Canada's and Quebec's political establishments - including business relationships with former Conservative prime minister Brian Mulroney, former Liberal prime minister Paul Martin and both business and personal relationships with former Liberal prime minister Jean Chretien, whose daughter is married to one of Desmarais's sons..