The C$135.6 billion Public Sector Pension Investment Board (PSP) generated a net 12.8% return for Fiscal Year 2017, outperforming its benchmark by nearly 1%, and showing a vast increase over 2016’s 0.7% net returns.
The PSP’s returns created $15.2 billion of net income, net of all PSP Investments costs. Assets under management increased 16.1% from the previous fiscal year—from $116.8 billion to reach $135.6 billion at the end of fiscal year 2017. The PSP attributes this increase to net income (net investment costs of $15.2 billion and net contributions of $3.6 billion).
“We believe that attracting a talented, high-performing workforce and building relationships with the strongest institutional partners worldwide is translating directly into results in our investments,” said PSP President and CEO André Bourbonnais in the company’s press release. “Our vision is to be a leading global institutional investor that puts the interests of the contributors and beneficiaries at the heart of everything we do. I am proud of the progress that our employees and partners have made to bring this vision to life.”
Other key takeaways include:
Private debt was the strongest investment with a 27.5% return vs. their 12.4% benchmark. This was followed by natural resources with a 19.5% return vs. the 5.3% benchmark — featuring projects in the US and Australia, as well as the expansion of four existing agricultural investments to total C$3.7 billion, according to Benefits Canada.
Next came Public markets, with a 16% return (vs. a 14.9% benchmark) as PSP Investments created an internal global equity research and investment platform to provide sector and company-specific information.
Real estate returns were at 10.8% compared to a 6.2% benchmark — specifically seniors’ properties in Canada, the United States and Britain. Returns also came from student housing and a large office project in Britain, as well as new developments in Mexico, Colombia, and China.
The remaining returns came from infrastructure investments, which include hydroelectric assets in New England, renewable energy platform Cubico, and ROADIS, which owns 1,644 km of roads in Brazil, Mexico, India, Spain, and the United States at a 14.4% return compared to a 5.2% benchmark.
Private equity was the only negative return at -3.4% vs. a 9.3% benchmark. Private equity investments consisted of US physician services organization Team Health, global advisory firm AlixPartners, animal intelligence technology company Allflex Group, and Keter Group, which makes resin consumer products. PSP will also acquire Cerba Healthcare, which operates clinical pathology laboratories in Europe, before the new fiscal year ends.
To focus on private debt and private investment opportunities, the pension fund recently opened a European hub in London.
The full asset class performance highlights chart can be viewed below.