CDPQ Announces 7.2% Return in 2023

Assets of the Quebec pension investment manager grew to $321.72 billion 
Reported by Matt Toledo



The Caisse de dépôt et placement du Québec has announced 7.2%
annual returns for 2023. The Quebec pension manager saw its assets grow to C$434 billion ($321.72 billion).  

The fund only slightly underperformed its benchmark of 7.3%, a result of underperformance in the fund’s real estate portfolio. For the past five years, CDPQ returned an annualized 6.4%, against a benchmark of 5.9%. The annualized return for the past 10 years was 7.4%, with a benchmark of 6.5% for the period.  

“The year 2023 was marked by highly volatile bond markets and a historic concentration of gains from a handful of U.S. tech stocks that drove the main stock indexes. Faced with this context, our portfolio performed well, and our depositors’ plans continue to be in excellent financial health,” said Charles Emond, president and CEO of CDPQ, in the fund’s annual report. 

“Since 2020, investors have had to weather market conditions that ranged from one extreme to the other. In such environments, our portfolio has grown by nearly C$100 billion over the period. We may reach a crossroads in the year ahead, with many central banks likely to pivot, but the scope and sequence remain unknown. With a backdrop of downward but persistent inflationary pressure combined with lingering volatility, our portfolio remains well positioned to keep delivering the long-term returns our depositors need,” Emond continued. 

Real Estate Weakness  

CDPQ’s C$105.4 billion real assets portfolio, which includes the fund’s real estate and infrastructure investments, returned 2.2% in 2023, well above its benchmark of negative 4.3%. Infrastructure assets returned 9.6% against a benchmark of 0.3%, with performance drivers during the year being transportation and renewable energy assets.  

For the past five years, infrastructure assets returned an annualized 9.5% against a benchmark of 5.9%. CDPQ attributed these returns to renewable energy, port and telecom assets. 

However, the portfolios real estate assets did not perform as well and were the fund’s worst-performing asset class during 2023. The fund’s real estate assets returned negative 6.2%, although above the benchmark of negative 10%.  

The fund’s office holdings, as well as the portfolio’s overweighting in Canadian shopping centers were some of the reasons for the fund’s lower returns from real estate. 

“Despite economic challenges and structural issues in some sectors such as offices, the Real Estate portfolio demonstrated more resilience, and the repositioning toward promising sectors such as logistics that began in 2020 mitigated the decrease in value,” the report states. 

For the past five years, real estate returned a negative 0.5% against a benchmark of 0.8%. While real estate returns were weaker, CDPQ notes that its teams were able to remain selective in its acquisitions in what the fund calls the slowest transactional market in 15 years.  

Stocks Boosted Returns While PE Underperformed  

Like many other institutional investors, a rally in large-cap tech stocks and growth stocks, in general, boosted returns for CDPQ, with its equity markets portfolio returning 17.7%, outperforming its 17.4% benchmark result.  

Historically, the fund had underperformed its public markets benchmark, returning 9% over the past five years, compared to a benchmark return of 10%, which the fund attributed to once having lower exposure to large-cap U.S. growth and tech stocks.  

Returns for private equity assets, which combined with public equities in the fund’s equity portfolio, were not as strong. CDPQ’s PE portfolio returned 1.0%, well below its benchmark of 10.5%. However, CDPQ says it expected a slowdown in growth in private equity, following returns of 39.2% in 2021 and 2.8% in 2022, a year when it expected neutral returns for that portfolio and when the overall fund returned negative 5.6%.  

Combined, the public and private equity portfolios represent C$194.2 billion in assets.  

Fixed Income: Returns Elevated by Higher Rates 

CDPQ’s C$ 135 billion fixed-income portfolio returned 8.1% in 2023, outperforming its benchmark’s 7.7%. Higher yields and narrower corporate credit spreads, combined with a volatile bond market led to the portfolio outperforming its historical returns.  

CDPQ attributes strong returns to “the portfolio’s positioning in government debt, which benefited from lower rates in certain emerging countries, good execution in corporate credit and premiums on private debt that foster a high current return.” 

Over the past five years, the CDPQ’s fixed income portfolio returned an annualized 1.7% against 0.8% for the benchmark.  

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CDPQ Extends CEO Charles Emond’s Term, Invests in Local Consultant, Japan Solar Plant 

CDPQ Aims to Save C$100M per Year by Bringing Real Estate Units Into Main Business 

CDPQ Reports It Is on Target to Reach Net Zero by 2050 

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Caisse de dépôt et placement du Québec, CDPQ, Charles Emond,