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Performance of the Caisse de dépôt | The best performance in ten years



The asset manager of Quebec’s public pension and insurance plans achieved its best performance in ten years last year. It earned a weighted average return of 13.5% in 2021, better than its benchmark at 10.7%.

By comparison, the average return for Canadian pension funds was 8.9% last year, according to RBC Investor & Treasury Services’ Pension Plan Universe.

Yields for the top eight depositors range between 9.3% and 15.9% over one year. Over ten years, their annualized returns vary between 8.2% and 10.6%. Depositors’ return needs are on average 6% over the long term. For example, Quebec Pension Plan funds generated returns of 15.9% for the basic plan and 14.4% for the additional plan last year. Over 5 years, the average return of the QPP is 9.8%.

The unveiling of the Caisse’s financial results took place the morning of the invasion of Ukraine by Russia. Following the economic sanctions imposed by Canada on the Russian giant, the boss Charles Emond announced that the organization would withdraw all its marbles from the country of Vladimir Putin.

Portfolios that meet expectations

In terms of financial results over the past year, all three major asset classes contributed to results, namely real assets, fixed income and equities. “All the wallets really delivered the goods. The three main categories are above their index,” rejoiced the President and Chief Executive Officer of the Caisse, in his presentation.

In real assets, the infrastructure component steals the show with a return of 14.5%, more than 3 points above the benchmark index. The Caisse achieved its best annual performance in ten years in this sector, despite the underperformance of infrastructures linked to passenger transport such as the Eurostar and Heathrow airport. Assets that have performed well are concentrated in telecommunications and renewable energy.

The other category of real assets, real estate, did well after two difficult years. It continued its transformation, closing 104 deals worth $19 billion last year. Its annual return of 12.4% is the best since 2015. “This figure demonstrates the validity of our decisions,” said the head of real estate, Nathalie Palladitcheff, president and chief executive officer of Ivanhoé Cambridge.

The real estate subsidiary deflated the weight of its holdings in shopping centers and office towers to better focus on industrial and logistics and the residential sector. It has also invested in buildings for the life sciences and in film studios.

In fixed income, the Caisse was struggling with the headwind of rising interest rates and inflation. The category’s slightly negative return nevertheless remains better than that of its index, mainly thanks to the performance of the private credit portfolio. The Caisse is a major mortgage lender and also lends to businesses. Just last year, commitments amounted to 20 billion in private credit.

In the equity category, all the portfolios, Quality, Growth and Growth Markets, are doing better than the index. The only exception, the Canada portfolio is underperforming. “Exposure to technologies has increased since 2020. Last year, the stock market was strong. We were rewarded for this adjustment,” acknowledged Vincent Delisle, head of liquid markets.

That being said, the big star in the equity category is the private placement, which delivered an outstanding performance of 39.2% in 2021, its best since the portfolio’s inception nearly 20 years ago. In two years, the return is 60%.

To a question from the media on the bubble effect in private placements, Mr. Emond replied that a large portion of the returns of 2021 come from dispositions, therefore profits with real dollars and not only profits on paper.

The private placement now includes $80 billion in assets, or 20% of the Caisse’s total assets. The catch-up with peers is over and the proportion will not increase, said Mr. Emond. “It’s a portfolio that is maturing in terms of asset allocations,” he said. The Caisse also sold more than bought in 2021.

Spending jumps by 135 million

As of December 31, the asset manager’s net assets totaled 419.8 billion, up 55 billion in one year.

The Caisse’s assets invested in Québec reached $78 billion, an increase of $10 billion concentrated in the private sector. Commitments were made in no less than 75 files last year.

Operating expenses, including external management fees, jumped 135 million in 2021, an inflation of 18%. The Caisse denies losing control of its budget since the expense ratio remains unchanged at $0.23 per $100 of net assets.

Charles Emond on…


Mr. Emond justified the increase in the Caisse’s stake in the natural gas distributor Énergir, which is called upon to manage its decline in the future. “It’s a very fine Quebec society. It has provided an extremely attractive yield to depositors and has a very high current yield. We like the management. Natural gas is a transition energy that is here to stay. Énergir is part of the solution to decarbonize Quebec. »

French in business

Charles Emond took a position on the use of French within Quebec societies. “Respect for French is an essential principle. For all Quebec companies, we talk to them about it in private, about putting French at the center of the equation. It’s just common sense. A company based in Quebec, holding a general meeting only in English is unacceptable. »

Eastern REM

Asked about the growing opposition to the REM de l’Est, Mr. Emond wanted to refocus the debate on the role of the Caisse. “It is not up to the Caisse de dépôt to ultimately determine whether the REM de l’Est is the best solution. It’s up to the proper authorities. The Caisse is the promoter of the project. A question is answered by submitting the best answer taking into account a host of factors. Transportation planning is not the Caisse’s role. »

Investments in Russia

“We sold all our positions [participations directes en actions] in companies under sanctions, ”said the boss of the Caisse. He added, however, that it is impossible not to be exposed to Russia in global indices. “We are already very active in correcting the situation in order to replicate our indices internally and extract Russia. There are teams mobilized to settle this in a few weeks. »

Interview by André Dubuc and Richard Dufour, The Press

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