PSP Investments Reports 4.4% Return in Fiscal 2023

Canadian pension investment manager the Public Sector Pension Investment Board reported a 4.4% return for fiscal 2023, easily beating its benchmark’s return of 0.2% and raising its net assets under management to C$243.7 billion ($182.3 billion) from C$230.5 billion at the end of fiscal 2022.

Net transfers received from the federal government represented C$2.9 billion, while net income generated C$10.2 billion.

PSP Investments reported five- and 10-year annualized returns, net of expenses, of 7.9% and 9.2%, respectively, outperforming its benchmark’s returns of 5.5% and 7.4%, respectively, over the same time periods. According to the board, this outperformance yielded C$25.4 billion and C$31.2 billion, respectively, in cumulative net investment gains above its benchmark.

“Our strategy to diversify into private markets and expand internationally has been key to maintaining stability in exceptionally volatile financial markets,” PSP Investments CIO Eduard van Gelderen said in a release. “Our foreign currency exposure is an important component of our portfolio construction approach.”

Public Sector Pension Investment Board Fiscal 2023 Returns

The Canadian pension manager easily beat its benchmark. Chart reflects asset classes (at March 31, 2023) and net assets under management*.

One-year return

Five-year return

10-year return

Capital Markets: $98.5B AUM

0.3%

5.8%

8.2%

Private Equity: $37.2B AUM

3.3%

15.6%

12.1%

Credit Investments: $26.1B AUM

13.1%

8.9%

11.2%

Real Estate: $32.0B AUM

0.2%

6.0%

9.2%

Infrastructure: $29.4B AUM

19.0%

10.5%

11.7%

Natural Resources: $12.3B AUM

10.9%

8.5%

11.2%

Complementary Portfolio: $2.2B AUM

-0.2

5.8%

10.1%

 *Table excludes cash and cash equivalents. All currency amounts in Canadian dollars.
Source: Public Sector Pension Investment Board

Van Gelderen said the board’s foreign currency exposure during the fiscal year contributed 5.8% to its net return, as the euro and British pound rebounded, while its open U.S. dollar exposure mitigated the total fund’s downside risk.

PSP’s infrastructure portfolio contributed the most to the fiscal year’s investment gain, ending with net assets under management of C$29.4 billion as of March 31, a C$5.9 billion increase from a year earlier, while generating portfolio income of C$4.6 billion. The five-year annualized return of 10.5% for the asset class more than doubled its benchmark’s 4.8% return.

The board attributed the strong performance within the infrastructure portfolio to the current high inflationary environment, despite generally higher discount rates. It identified the transportation sector as the main contributor to the portfolio’s income, while the communications sector also provided a significant contribution.

Credit investments were also a major contributor to the investment gain and closed out the fiscal year with C$26.1 billion AUM, up $4.2 billion from the end of the previous fiscal year, while generating portfolio income of C$3.1 billion. The portfolio’s growth was mainly attributed to acquisitions of $6.7 billion and foreign currency gains of $1.7 billion, while the 8.9% five-year annualized return easily outperformed the 3.7% benchmark return.

However, the capital markets portfolio, made up of public equities and fixed income, offset some of PSP’s investment gains and ended the fiscal year with $1.4 billion fewer AUM to C$98.5 billion from the end of fiscal 2022. Despite the loss, the portfolio’s five-year return of 2.4% outperformed its benchmark’s five-year by 0.3%. The board said fixed income’s positive performance in fiscal 2023 was mainly due to defensive positioning with a significant short duration bias amid the general bond market downturn caused by a global increase in interest rates.

“These results are indicative of the resilience of our diversified portfolio,” Deborah Orida, PSP Investments’ CEO and president, said in a release.