Caisse de dépôt et placement du Québec, (CDPQ) Canada’s second-largest pension fund manager, reported a 9.3% return for 2017, and an annualized return of 10.2% over the past five years.
CDPQ said its 2017 return reflected strong equity market performance, but did not fully capture the surge in multiples for tech companies and companies with an accelerated growth profile.
CDPQ’s eight main clients received returns between 8.0% and 10.9% for the year ended Dec. 31, 2017, and between 8.7% and 11.5% over the past five years. Net investment results for the year were C$24.6 billion, and net deposits totaled C$3.2 billion.
Total net assets were C$298.5 billion, increasing by C$122.3 billion over five years, with net investment results of C$109.7 billion and C$12.6 billion in net deposits from its clients.
“Over a five-year period, we achieved our objective: a solid return that exceeds both our benchmark and the long-term needs of our clients,” said Michael Sabia, CEO of CDPQ, in a release. “With C$6.7 billion in new investments and commitments, we’ve had an exceptional year in Québec.”
CDPQ said that compared to its benchmark portfolio, its performance represented C$12.2 billion of added value for its clients over the last five years. The firm said it focuses on equities that provide stable and predictable returns in order to reduce sensitivity to market fluctuations, such as the volatility that hit the global markets in early February.
“We are facing an unusual environment,” said Sabia. “This volatility could have materialized at any time in recent months. So we continue building a more resilient portfolio that can withstand market transitions of this kind.”
The fund manager has significantly diversified its geographic exposure over the last five years, expanding its global investments by C$105 billion to more than C$190 billion. It also more than doubled its exposure in growth markets, which rose to more than C$35 billion at the end of 2017 from C$15 billion in 2012.
CDPQ said it repositioned its fixed-income assets in 2017 during a period when interest rates remained low, and bond returns were expected to be modest. It looks to diversify its activities by reducing its exposure to the traditional bond market, and increasing its credit activities in higher-performing market segments, including corporate credit, sovereign credit, and specialty finance.
The firm also reported more than C$7.6 billion in private equity transactions completed internationally. Some high-profile transactions include the acquisition of GE Water, a waste water management company, in partnership with SUEZ. CDPQ also invested in Sabia, a company that provides medical diagnosis technology, and Fives, an engineering group.
CDPQ also acquired a stake in eight Mexican wind and solar farms operated by Enel Green Power, and invested over C$390 million in Québec wind energy producer Boralex. The firm has doubled its worldwide infrastructure holdings over the last five years to more than C$16.0 billion.