CDPQ Returns 8.3% in Five Years, Beats Benchmark

Six-month returns fall short due to weak real assets performance.

The C$326.7 billion ($247.7 billon) La Caisse de dépôt et placement du Québec (CDPQ), which manages funds for Canadian public pension and insurance plans, beat its benchmark with an annualized return of 8.3% for the five fiscal years ending June 30, which represents net investment results of C$103.8 billion.

CDPQ also reported that the average return on depositors’ funds was 6.1% over six months, generating net investment results of C$18.4 billion.

“From a market perspective, we are living in roller coaster times,” Michael Sabia, CEO of CDPQ, said in a statement. He added that in the last half of 2018, markets performed poorly on the expectation of continued monetary tightening from the US Federal Reserve. However, the Fed offered more accommodating policies in December, which kicked off a market rally to start the new year.

“This reflects the growing codependency between the US central bank and capital markets,” said Sabia, “where each focuses on the other and the real economic conditions and profound structural changes occurring in the global economy are sometimes lost from sight.”

Depositors’ net assets increased C$17.2 billion to C$326.7 billion from C$309.5 billion as of Dec. 31, 2018, which was attributable to net investment results of C$18.4 billion and net depositor withdrawals of C$1.2 billion.

CDPQ’s five-year annualized return of 8.3% surpassed its benchmark index, which returned 7.2% over the same period. However, the 6.1% return CDPQ posted for six months fell short of its benchmark portfolio’s return of 7.5%. CDPQ attributed the shortfall to its real assets class, which lost 1.4% or C$900 million during the first half of 2019, compared to a 3.4% return for its benchmark index.

A weak performance by the real estate portfolio was attributed to downside pressure on traditional sectors to the benefit of new market segments such as industrial and logistics real estate and mixed-use buildings.

Equities were the top-performing asset class for the first six months of the year, returning 8.6%, however, this was below its benchmark’s return of 9.4%. Fixed income was the only asset class that beat its benchmark index for the first half, albeit barely, returning 7.0% compared with 6.9%.

Over the five-year period, CDPQ fared better. Equities were the top-performing asset class during this time, returning 10.4%, compared with the benchmark index’s return of 8.4%. Real assets returned 9.0%, just shy of the benchmark’s 9.1% return, while fixed income returned 4.6% annualized over five years, compared with 3.9% for the benchmark index.

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