Caisse de Depot’s 10% Return Sends Assets to $257 Billion

(Bloomberg) -- Caisse de Depot et Placement du Quebec returned 10.4% last year as stocks and fixed income shielded Canada’s second-largest pension fund manager from a poor performance in real estate.

Net investment income for 2019 amounted to C$31.1 billion ($23.5 billion), compared with C$11.8 billion a year earlier, the Montreal-based fund manager said Thursday in a statement. Net assets rose to C$340.1 billion (C$257 billion) as of Dec. 31, from C$309.5 billion at the end of 2018.

Public and private equity returned 15.3%. The Caisse said its public equities portfolio trailed its own benchmark by slightly less than one percentage point, partly due to its strategy of prioritizing value stocks, which are a longer term play.

Chief Executive Officer Charles Emond said the portfolio delivered during a year that saw markets getting “carried away” and seem disconnected from real growth.

“We are seeking to build a portfolio that is more diversified, more stable, more reliable, less vulnerable to market moves,” Emond said Thursday at the pension fund’s headquarters in Montreal.

Fixed income assets returned 8.9%, as the pension fund increased its exposure to corporate credit, real estate debt, specialty finance and sovereign credit. It’s also investing more in credit assets outside of Canada. Like other asset managers, the pension fund is trying to increase its holdings of higher-yielding private credit, but is doing so slowly because finding and screening companies is labor intensive, head of corporate credit James McMullan said last November.

Malls Suffer

The Caisse’s real assets portfolio, which includes infrastructure and real estate, was its worst performing asset class, returning 1%. Real estate holdings lost 2.7%. It was affected by the weak performance of Canadian shopping centers, whose valuations are declining as a result of a consumer shift toward e-commerce, and by residential real estate in New York, in light of new regulations to control rent increases.

The Caisse manages the pension plan of retirees in Quebec, Canada’s second most populous province, as well as various provincial insurance plans.

Its 2019 results trailed the average 14% increase of Canadian defined pension plans, as estimated by RBC Investor Services. The Caisse results were 1.6% below the fund manager’s own benchmark, mostly due to the performance in the real estate and infrastructure portfolios.

Still, the pension fund said it has generated C$11 billion in value added compared to its benchmark portfolio over five years and more than C$18 billion over ten years. The Caisse said its weighted average annual return was 8.1% and 9.2% for five and 10 years, respectively.

To contact the reporters on this story: Paula Sambo in Toronto at psambo@bloomberg.net;Sandrine Rastello in Montreal at srastello@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Derek Decloet

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