La Caisse and CalPERS Undertake Strategy Reviews

The Canadian fund has created a new infrastructure subsidiary while the US’ biggest pension is reorganizing its real assets investments.

19_Profile_Roland Lescure_TB.jpgRoland Lescure, La Caisse (Art by Tim Bower)Québec’s state pension has reshuffled its investment teams and created two new departments, including a subsidiary company to manage its infrastructure assets.

The C$248 billion (US$195 billion) Caisse de dépôt et placement du Québec (CDPQ) announced yesterday that it planned to create CDPQ Infra to manage its C$13 billion exposure to infrastructure. Macky Tall, currently senior vice president for infrastructure and private equity, will become president and CEO of the new entity.

In addition, La Caisse has placed new hire Jean Michel in charge of the fund’s new “Depositors and Total Portfolio Construction” division. Michel and his team will oversee “all top-down activities within the portfolio” as well as research and advisory services, La Caisse said. Michel joined last month from Air Canada Pension Investments, where he was president.

La Caisse also plans to consolidate its public and private markets investments under the leadership of CIO Roland Lescure. This will involve the private equity teams reporting directly to Lescure, who also oversees listed equity and fixed income investments. The move will “build a center of excellence for asset allocation,” the pension said.

“Over the years to come, we will be dealing with an increasingly complex environment, anemic growth, heightened volatility, and more modest returns,” said Michael Sabia, president and CEO of La Caisse. “In this context, selecting high-quality assets and focusing on the operations of our portfolio companies will be more critical than ever. We will also have to manage our top-down asset-allocation decision-making in a manner more closely integrated with our depositors’ liabilities.”

Meanwhile, south of the border, the California Public Employees’ Retirement System (CalPERS) announced plans to harmonize its approach to real asset subsectors including infrastructure, real estate, and forestry. As part of a five-year plan for real assets, the US$300 billion pension’s staff will seek to reduce leverage and apply a common set of risk parameters across each subsector; previously each one had a separate approach.

“The unifying elements of this strategic plan will make the asset class less complex to manage, and make reporting more transparent,” said Paul Mouchakkaa, managing investment director for real assets.

CalPERS will establish a pilot program for real estate managers which will alow the construction of unlevered mandates. In addition, the five-year plan sets out the fund’s aims for integrating environmental, social, and governance issues within real assets investments.

CalPERS also announced yesterday that it plans to review its divestment policy. Wilshire Associates reported last year that the pension’s divestments from stocks including tobacco companies may have cost roughly US$8 billion. Avoiding tobacco companies alone was estimated to have cost US$3 billion.

“Divestment as an investment strategy presents a challenging conflict for CalPERS, as it often pits social responsibility against our fiduciary duty as outlined in the California Constitution,” said Henry Jones, chair of CalPERS’ investment committee. “As a California public agency, we are sensitive to the policy issues surrounding divestment causes. But we’re also obligated to ensure that we maximize our investment returns on behalf of our members. We now have a clear path forward.”

A final decision is expected to be made in 2018.

Related: La Caisse Inks $2.1B Infrastructure Co-Investment Deal & Divestment as Abdication