Four-year annualized return reaches 10.9% - 9.1% return for 2015

Clients' net assets reach $248.0 billion

MONTRÉAL, Feb. 24, 2016 /CNW Telbec/ - Caisse de dépôt et placement du Québec today released its financial results for the year ended December 31, 2015. The annualized weighted average return on its clients' funds reached 10.9% over four years and 9.1% in 2015.

At year-end, net assets totalled $248.0 billion, compared to $159.0 billion as at December 31, 2011, an increase of $89.0 billion over four years. During that period, la Caisse posted net investment results of $81.6 billion and net deposits of $7.4 billion.

In 2015, net investment results totalled $20.1 billion and net deposits $2.1 billion. Public Equity portfolios generated close to half of these investment results, while less-liquid portfolios – Real Estate, Private Equity and Infrastructure – contributed $5.6 billion.

A chart is available on the Caisse's website

"In 2015, our strategy was put to the test. Uncertainty in the face of monetary policy, disorderly currency movements and collapsing oil prices all fueled market volatility, particularly in the second half," said Michael Sabia, President and Chief Executive Officer of la Caisse. "The market environment was also affected by anemic growth in developed countries and an overall slowdown in emerging markets.

"In this context, the quality of the assets in our portfolio allowed us to deliver solid results, confirming the soundness of our strategy. While not immunizing our portfolio against market movements, our strategy makes it more resilient in turbulent times.

Going forward, we need to look through market volatility to focus on creating real value. We will stay the course and continue to invest capital selectively. We will also continue to develop partnerships with world-class institutions and build value by focusing on the operational efficiency of businesses in our portfolio."

RETURNS BY ASSET CLASS

A chart is available on the Caisse's website

Over four years, la Caisse's annualized return is 0.9 percentage points higher than that of its benchmark portfolio, which stands at 10.0%. This difference represents $8.0 billion of value added, with $5.4 billion generated in 2015.

During the same period, the annualized returns of la Caisse's eight largest clients range from 9.3% to 12.2%, and in the year 2015, from 8.1% to 10.5%.

Longer-term results

Over five years, la Caisse's annualized return is 9.5%. Over 10 years, it is 6.0%. These returns are aligned with our clients' long-term requirements and primarily reflect la Caisse's performance since 2009.

HIGHLIGHTS – INVESTMENT STRATEGY

Benchmark-agnostic management

La Caisse's investment strategy focuses on a benchmark-agnostic approach based on a fundamental and rigorous analysis of investments. Portfolios are built on the basis of our investment beliefs, irrespective of benchmark indexes. Indexes serve only to retroactively assess portfolio performance.

The Global Quality Equity portfolio constitutes a cornerstone of this strategy. It reached $33.9 billion in net assets as at December 31, 2015. From its inception in 2013, it has generated annualized returns of 24.0%. The portfolio's extensive international diversification, its strong focus on more stable and predictable securities and positions in promising sectors, such as healthcare and consumer products have greatly contributed to this performance.

In a context of a broad-based decline in Canadian markets, our Canadian Equity portfolio demonstrated its resilience by outperforming its index both over the four-year period and in 2015. The portfolio, more focused on high-quality securities, places a special emphasis on Canadian companies poised to benefit from the growth of the U.S. economy. It also has limited exposure to the materials sector, especially gold securities, which yielded negative returns in 2015.

Our benchmark-agnostic approach is now applied to close to a third of our Emerging Markets Equity portfolio. This explains its above-market performance. By selecting partners who share our investment philosophy and have deep knowledge of these markets, la Caisse was able to generate a higher return while reducing risk.

Less-liquid assets

La Caisse focuses on less-liquid assets that generate more stable and predictable current yields over the long term. The increased volatility in public equity markets and the low yields expected in bond markets reinforce the importance of these more resilient assets in la Caisse's overall portfolio.

All three portfolios – Real Estate, Private Equity and Infrastructure – generate strong results over time, with a 12.4% return over four years.

In Real Estate, 2015 was a defining year for Ivanhoé Cambridge, la Caisse's subsidiary. Transaction volume reached $18.2 billion, including $12.4 billion in acquisitions and $5.8 billion in dispositions. In the office sector, Ivanhoé Cambridge became the leading foreign institutional investor in the United States in 2015 with major investments in New York, Chicago, Los Angeles, Boston, Denver and Seattle. With the acquisition of Three Bryant Park and Stuyvesant Town/Peter Cooper Village, Ivanhoé Cambridge became the seventh largest property owner in Manhattan.

In Private Equity, la Caisse invested $15.6 billion over four years, including $5.6 billion in 2015. One of this year's main transactions was its participation in the acquisition of O2 by Three UK, which contributed to the creation of the leading wireless operator in the United Kingdom. This investment was made in partnership with other large institutional investors, including Hutchison Whampoa Limited, the largest company listed on the Hong Kong Stock Exchange. In 2015, la Caisse also invested USD 1.5 billion in Bombardier Transportation, a global leader in rail transportation with significant growth potential.

In Infrastructure, la Caisse carried out investments of $7.4 billion over four years, including $3.5 billion in 2015 alone. Acquisitions include an interest of close to 25% in Transgrid, the electricity-transmission network of the State of New South Wales in Australia. It also acquired a 30% interest in Eurostar, the high-speed train linking London to continental Europe through the Channel Tunnel.

Impact in Québec

Over the past year, la Caisse continued its investments to contribute to the development of strong Québec companies capable of competing with the best in their industry. It also made networks of partners and teams of experts available to companies to further their global expansion.

As a partner of the company since 2011, la Caisse reinvested in WSP last year to finance the acquisition of a Canadian engineering consulting firm. In 2015, la Caisse reinvested in D-BOX, a company with which it has been a partner for five years and facilitated its entry into China through its teams in Asia. It also reinvested in Agropur to strengthen its position as one of the leading North American dairy processors.

In a world where competitiveness is tied to innovation, la Caisse expects to play a greater role in accelerating Québec companies' adaptation to the digital era. It is targeting innovative industries (technology, electric transportation, etc.), and companies turning to innovation to increase their productivity and operational efficiency and better serve their markets. In 2015, la Caisse invested in Lightspeed, a business specializing in cloud technology, to optimize its technological infrastructure and to further develop its e-commerce offering.

In infrastructure, our new subsidiary, CDPQ Infra, is studying two major projects identified as priorities: the electric public transit system on the new Champlain Bridge, and the one linking downtown Montréal to the Montréal-Trudeau International Airport and the West Island. Substantial progress has been made over the past few months, including the establishment of a team of experts, the launch of traffic studies and the creation of engineering offices. A consultation process will be launched in the spring of 2016, in collaboration with the main municipal partners in the Montréal metropolitan region.

In real estate, Ivanhoé Cambridge continues with its $1-billion investment plan for downtown Montréal by focusing in particular on Place Ville Marie, Fairmont The Queen Elizabeth hotel and Maison Manuvie. In Québec City, it began the modernization of the Place Ste-Foy and Laurier Québec shopping centres and is completing Phase 1 of the Quartier QB residential project.

To support entrepreneurship, a pillar of our Québec strategy, la Caisse announced the creation of Espace CDPQ, designed to bring together key stakeholders in the entrepreneurial ecosystem to foster innovation and globalization. Created for the 50th anniversary of la Caisse, this facility is slated to open in spring 2016.

At the end of 2015, assets of la Caisse in Québec totalled $59.7 billion. New investments and commitments total $11.2 billion over the past four years, including $2.2 billion in 2015 (this figure excludes the investment in Bombardier Transportation). At year-end, through its direct investments and specialized funds, la Caisse was a partner to approximately 550 Québec SMEs.

Global footprint

Seeking greater exposure to global growth and better diversification of its portfolio, la Caisse expanded its global footprint by more than 13 percentage points over the past four years. Today, close to 54% of its exposure is outside Canada.

The United States represents a key market for la Caisse where it invested close to $18 billion in real estate, $6.8 billion in private equity, and $2.6 billion in infrastructure over four years. Today this exposure has a total value of over $73.4 billion.

La Caisse is well aware of the challenges in growth markets and continues to apply a selective and rigorous approach when investing in these markets. It targets specific countries, such as Mexico and India, where promising reforms are under way, relying on partnerships with investors and operators whose extensive local market knowledge complements la Caisse's expertise.

La Caisse made its first infrastructure investment in Mexico in 2015, through a co-investment platform in partnership with a consortium of Mexican institutional investors, including Mexico's three largest pension plans. The consortium intends to jointly invest $2.8 billion in transportation and energy infrastructure projects over the next five years.

In Asia, Ivanhoé Cambridge continued to build its presence with a significant investment in Chongbang, a developer, owner and operator of real estate projects in Shanghai. It also invested in an investment vehicle of LOGOS, a company specialized in logistics facilities well established in Shanghai and Asia-Pacific.

In the context of its globalization strategy, la Caisse has opened offices in Singapore, Washington, Mexico City and Sydney. It has also bolstered its investment and research teams in New York. In 2016, la Caisse plans to open offices in London and Delhi.

FINANCIAL REPORTING
Over the past year, la Caisse pursued efforts to improve efficiency. Including external management fees, its operating expenses totalled $424 million in 2015. The ratio of expenses was 18.0 cents per $100 of average net assets, a level that compares favourably to that of its industry.

Finally, the credit rating agencies reaffirmed la Caisse's investment-grade ratings with a stable outlook, namely AAA (DBRS), AAA (S&P) and Aaa (Moody's).

ABOUT CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC
Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at December 31, 2015, it held $248.0 billion in net assets. As one of Canada's leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure and real estate. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.

A chart is available on the Caisse's website

N.B.: As of 2016, la Caisse will disclose its one-year, five-year and ten-year results. This adjustment, aimed at extending the period based on which la Caisse measures its performance, better reflects its benchmark-agnostic strategy.

FACT SHEET - Fixed income

Description

The Fixed Income asset class reduces the level of overall portfolio risk and allows for a certain matching of clients' assets and liabilities. It also constitutes a substantial source of liquidity.

This asset class consists of four portfolios. The Bond and Real Estate Debt portfolios, with net assets totalling $79.2 billion, are managed actively, whereas the Short Term Investment and Long Term Bond portfolios, with net assets totalling $6.9 billion, are indexed.

Market context

The past four years have been characterized by unprecedented monetary easing measures implemented by the main central banks. To support economic activity, the banks lowered their key interest rates to near 0%. They also introduced significant quantitative easing programs, in particular by purchasing government bonds. These programs have exerted downward pressure on bond yields around the world.

A chart is available on the Caisse's website

Since their sudden spike in the spring and summer of 2013 – in response to market expectations that the U.S. Federal Reserve could potentially scale back its monetary easing measures – yields have clearly trended downward. This is primarily due to:

  • fears of deflation in Europe; and
  • market expectations that the European Central Bank (ECB) would implement a major quantitative easing program.

The ECB's implementation of such a program in March 2015 led to a sharp decline in bond yields, not only in Europe but also in the rest of the world. The collapse in oil prices since mid-2014 also placed downward pressure on yields.

In Canada, yields remained relatively close to those in the U.S. until 2014. Since then, the spread has widened due to the impact of low oil prices on growth. Twice in 2015, the Bank of Canada reacted by trimming 25 basis points from its key interest rate.

Highlights of results

A chart is available on the Caisse's website

The Fixed Income portfolios benefited from declining interest rates in recent years. Over four years, this asset class provided net investment results of $11.4 billion. The annualized return on this asset class totalled 4.0%, which is 0.5% above the benchmark index. In 2015, the Fixed Income asset class returned 3.9%.

BONDS

This actively managed portfolio generated net investment results of $8.8 billion over four years. Its annualized return of 4.1% benefited from:

  • lower bond yields in Canada, and
  • narrower spreads between federal government bonds and provincial and corporate bonds.

The return on this portfolio, which outperformed its index by 0.4%, was largely due to private debt activity and positions in U.S. financial institution bonds. The strategy focused on the narrowing of yield spreads also added value due to the overweighting of provincial bonds in the portfolio.

In 2015, the bond portfolio generated a return of 3.8%. This positive return was due to lowering yields in Canada, la Caisse's credit strategies and a strong performance by corporate bonds, which are an area of focus for the portfolio. Among the securities that made the greatest contribution to this return were companies such as Citigroup, Agropur and Boreas.     

REAL ESTATE DEBT

This actively managed portfolio consists primarily of senior Canadian commercial mortgage loans on quality real estate assets.

Over four years, the portfolio's net investment results reached close to $2.0 billion. The annualized return was 5.5%, which is 1.9 percentage points above the benchmark index. The value added during this period came mostly from a current portfolio yield that outperformed that of the index.

In 2015, the portfolio returned 5.1%, most of which was due to the current yield. Lowering federal yields also made a positive contribution, but this effect was offset by wider credit spreads.

SHORT-TERM INVESTMENTS

This indexed portfolio provided an annualized return of 1.0% over four years and a return of 0.7% over one year. These results reflect the low short-term interest rates that have prevailed in recent years.

LONG-TERM BONDS

This indexed portfolio had an annualized return of 4.6% over four years and a 4.7% return in 2015. An appreciable current return on long-term bonds and lowering yields in Canada also contributed to these results.

FACT SHEET - Inflation-Sensitive Investments

Description

The Inflation-Sensitive Investments asset class consists of three portfolios: Real Estate, Infrastructure and Real Return Bonds. The investment income generated by these assets is generally tied to inflation. This partially hedges the inflation risk associated with the liabilities of many of la Caisse's clients. This asset class is also less sensitive to market movements, both in periods of rapid expansion or contraction.

The Real Estate and Infrastructure portfolios, which represent $40.0 billion in net assets, are managed using a benchmark-agnostic approach. They focus on quality, solid and resilient assets. They benefit less when markets make strong gains, but offer sound capital protection in times of market turbulence.

The Real Return Bonds portfolio has net assets of $1.0 billion and is indexed.

Market context

This asset class has generated high returns in recent years as a result of the broad-based decline in interest rates and the economic recovery in the United States. Strong demand from institutional investors for buildings and infrastructure has also exerted upward pressure on prices. The attractiveness of these less-liquid assets is tied to their excellent risk-return profile and the high and stable income they generate, while diversifying risk in the portfolio.

The U.S. real estate market expanded strongly in 2015. Growing demand in all segments of the real estate market reflected stronger economic fundamentals. In many large U.S. cities, interest among investors for office buildings and residential properties resulted in higher asset valuations. In Europe, interest in real estate assets in most markets caused property values to rise. The Canadian market offered solid returns, particularly on shopping centres and prestigious office buildings due to strong leasing revenues and sustained demand for high-quality assets. However, disparities exist in markets across the country.

In infrastructure, increased volatility in equity markets and low returns in bond markets continued to fuel investors' interest. As governments around the world seek to reduce budget deficits, the number of transactions by private investors is growing.

Highlights of results

A chart is available on the Caisse's website

Over four years, this asset class generated net investment results of $13.1 billion and an annualized return of 11.3%. In 2015, the return was 10.6%.

REAL ESTATE

The Real Estate portfolio generated an annualized return of 12.6% over four years, producing net investment results of $10.0 billion. For 2015, the return on this asset class was 13.1%.

In recent years, managers at Ivanhoé Cambridge, la Caisse's real estate subsidiary, have undertaken a strategic repositioning of the portfolio. They sold properties that no longer match the required quality profile or that are not in targeted segments or markets. In the past five years, over two-thirds of the portfolio's assets have been repositioned.

This portfolio benefited mainly from increases in the value of its shopping centres and office buildings, over the four-year period as well as in 2015. It also benefited from strong leasing revenues generated by its properties as a result of high occupancy rates.

In 2015, Ivanhoé Cambridge completed $18.2 billion in transactions, including $12.4 billion in acquisitions. They were particularly focused in the U.S. market, in office buildings, but also in the multiresidential sector, to take advantage of a strong trend among households toward renting rather than buying. The European assets of Ivanhoé Cambridge also performed exceptionally well in 2015, due, among other factors, to the repositioning of the portfolio in Paris and in London, and to key investments such as Gecina and P3 Logistic Parks.

Main acquisitions concluded over the past year were:

  • Stuyvesant Town/Peter Cooper Village: jointly with Blackstone, and following an agreement with the City of New York, acquisition of this large housing complex in Manhattan, New York (USD 5.3 billion with its partner);
  • Three Bryant Park: acquisition of this prestigious office building in Midtown, Manhattan, New York (USD 2.2 billion);
  • Chongbang: joint investment with APG, a pension asset manager, for a strategic interest in this leading developer, owner and operator of mixed-use real estate projects in Shanghai (USD 920 million with its partners);
  • Hamlet Gardens, 4B Merchant Square, Hill Street and Circus Apartments: joint investments with Residential Land to acquire these four multiresidential properties in London, U.K. (approximately GBP 300 million with its partner); and
  • Liberty Place: acquisition of 25% of a 42-storey office building in the downtown core of Sydney, Ivanhoé Cambridge's first real estate investment in Australia (more than AUD 250 million in partnership with Blackstone Property Partners Asia).

Property sales were mostly in Europe, notably in Paris with the T1 and B towers in the La Défense area and 75 avenue de la Grande Armée.

A chart is available on the Caisse's website

INFRASTRUCTURE

Over four years, the Infrastructure portfolio produced a 9.8% annualized return and generated $3.0 billion of net investment results. In 2015, the portfolio returned 6.6%.

Slightly more than half of the performance over the past four years was due to the current return, which reflects solid results from the operating companies in the portfolio. The remaining portion was attributable to higher asset values, reflecting their quality and the growing interest among investors for this asset class.

In five years, the Infrastructure portfolio has tripled in size, from $4.3 billion in net assets in 2010 to $13.0 billion at the end of 2015. This growth resulted in greater asset diversification, both geographically and by segment. The managers focused on increased capital investment in the U.S. and Australia and less concentration in Europe. In 2015, they made a first investment in Mexico, a country with strong growth potential whose government is currently introducing promising reforms.

Over four years, la Caisse has invested $7.4 billion in infrastructure, including $3.5 billion in 2015 alone. The main investments of the past year were:

  • Transgrid: interest in the consortium of investors having acquired the 99-year lease of Australia's largest electricity transmission network located in the State of New South Wales, for a holding of close to 25% (AUD 1.2 billion);
  • Creation of a co-investment platform, in collaboration with a consortium of Mexican institutional investors, to implement several transportation and energy infrastructure projects in Mexico (planned joint investment of $2.8 billion over five years);
  • Eurostar: acquisition, in partnership with Hermes Infrastructure, of 40% (30% Caisse, 10% Hermes) of Eurostar, Europe's pre-eminent high-speed rail operator; and
  • Southern Star Central Corporation: partnership with GE Energy Financial Services to jointly acquire this well-established company that operates a regulated natural gas pipeline network in the U.S.

In July 2015, la Caisse created CDPQ Infra. This subsidiary will act as the owner-operator of infrastructure projects globally. Two proposals are currently being studied in Québec: the electric public transit system on Montréal's new Champlain Bridge and that linking downtown Montréal to the Montréal-Trudeau International Airport and the West Island.

A chart is available on the Caisse's website

REAL RETURN BONDS

This indexed portfolio had an annualized return of 1.0% over four years. In 2015, the portfolio benefited from the lower real rate environment and posted a 2.8% return.

FACT SHEET - Equity

Description

The Equity asset class comprises six portfolios. The Canadian Equity, Global Quality Equity and Private Equity portfolios, with net assets totalling $82.4 billion, are managed actively. The Emerging Markets Equity portfolio, with net assets totalling $13.7 billion, has a substantial active management component. The U.S. Equity and EAFE (Europe, Australasia and Far East) Equity portfolios, with net assets totalling $21.5 billion, are indexed.

Market context

The performance of the benchmark indexes diverged in the period from 2012 to 2015. Support from the world's major central banks, in particular the unprecedented monetary easing measures implemented to stimulate economic activity, drove investors toward more risky assets to generate returns. The U.S. and EAFE stock indexes benefited the most. The Canadian and emerging market indexes also benefited but came under pressure as a result of broadly lower commodity prices.

A chart is available on the Caisse's website

The ongoing growth in equity returns came to an end in 2015. This situation is primarily due to market concerns over:

  • slowing growth in China;
  • the prospect of higher interest rates in the United States; and
  • weaker growth outlook in developed countries.

Economic activity in China has slowed over the past few years as the economy was redirected toward domestic demand and services. This encouraged investors to abandon equity markets, in particular the stock exchanges of countries that are China's major trading partners and those of commodity-producing countries. The emerging markets index was particularly affected, as was the Canadian index, which also suffered from the collapse in oil prices.

The continuous improvement in labour market conditions in the U.S. led the Federal Reserve to tighten monetary policy in December 2015. The prospect of higher rates resulted in significant capital flows out of emerging equity markets throughout the year.

Weak productivity in developed countries, particularly in the United States and the United Kingdom, limits the potential for growth. Major challenges remain in some economies, including Japan and the euro zone. All of this led markets to revise their growth outlook downward for these countries.

In 2015, la Caisse's diversification on international stock markets allowed its portfolios to generate strong returns in Canadian dollars. Portfolios benefited from the Canadian dollar's significant depreciation, particularly against the U.S. dollar.

Highlights of results

A chart is available on the Caisse's website

Over four years, the Equity asset class was the biggest contributor to la Caisse's overall return, generating net investment results of $51.4 billion, including $41.6 billion from public equity markets portfolios and $9.8 billion from the Private Equity portfolio. The annualized return on this asset class totalled 14.9%, 1.5 percentage points above its benchmark index. For 2015, the return on this asset class was 11.0%.

GLOBAL QUALITY EQUITIES

The Global Quality Equity portfolio is invested in well-established large cap companies with exposure to global growth that provide more stable results with less risk. Since its inception in 2013, it has generated a 24.0% annualized return, compared to 17.3% for its benchmark index. With an annualized value-added of 6.7%, this portfolio generated, in only three years, more than two-thirds of the value-added realized by all the equity portfolios over four years, for a contribution of $3.6 billion.

In 2015, the portfolio had a 21.5% return due to the excellent performance of certain securities of companies in the U.S., Europe and Japan. The gains came in particular from companies in the healthcare sector (Medtronic, UnitedHealth, Roche), the consumer products sector (Unilever, Kimberly-Clark) and the telecommunications sector (KDDI, Orange). Positions held in this portfolio proved resilient to market downturns in the second half of the year.

CANADIAN EQUITIES

This portfolio produced a 7.8% annualized return over four years, which is 1.4 percentage points higher than its benchmark index. It generated $6.6 billion of net investment results.

The portfolio's absolute return during this period is attributable to strong performance in the finance, consumer products and information technology sectors. An investment strategy aimed at selecting quality securities, in particular those of companies with a very high exposure to the U.S. market, also proved profitable.

The portfolio also benefited from the excellent performance of Québec securities, which accounted for 35.7% of its assets as at December 31, 2015. This performance was fueled by various factors, including lower exposure to the natural resources sector and greater exposure to the U.S. market.

In 2015, the Canadian equity market was hard hit by the collapse of oil and other commodity prices, which weakened the portfolio's return. However the -3.9% return was better than the decline of its index  (-7.3%), showing the portfolio's resilience since the introduction of a benchmark-agnostic approach. Today, the portfolio is more concentrated and relies on quality securities that are less sensitive to market fluctuations in order to preserve clients' capital. Among these securities, we note the strong performance of companies in the consumer products sector (Couche-Tard, Magna, Dollarama), the information technology sector (CGI), the industrials sector (Agrium) and the healthcare sector (Catamaran Corporation).

EMERGING MARKETS EQUITIES

Over four years, this portfolio generated an 8.6% annualized return, compared to a 7.9% return for its benchmark index. This result is due to the good performance of Asian equity markets, particularly those of China, Taiwan, South Korea and India.

This result also demonstrates the advantage of having integrated an active management component in this portfolio since July 2013. These activities generated an annualized return of 21.3% since their implementation and were carried out alongside well-established partners, with deep knowledge of these markets, and who share la Caisse's benchmark-agnostic approach.

In 2015, the portfolio returned 5.8%. It benefited from the benchmark-agnostic component, including a favourable positioning with respect to China.


U.S. EQUITIES AND EAFE EQUITIES

Both of these portfolios are indexed.

The U.S. Equity portfolio generated a 24.7% annualized return over four years and a 21.7% return in 2015.

The EAFE Equity portfolio generated a 17.1% annualized return over four years and a 19.3% return in 2015.

The appreciation of the U.S. dollar and of the currencies of most of the other developed countries against the Canadian dollar had a positive impact on these returns.

PRIVATE EQUITY

Over four years, the Private Equity portfolio generated net investment results of $9.8 billion, with a 13.4% annualized return. In 2015, the portfolio returned 8.4%.

Increased earnings and improved operating performance by portfolio companies contributed to this solid performance. Several companies also made acquisitions at attractive valuation levels and launched initial public offerings, which increased the value of la Caisse's shareholdings.

In recent years, the portfolio's composition has changed significantly. As a result of the decision to reduce the proportion of funds in favour of direct investments, their weight in the portfolio fell from 68.0% in 2009 to 44.0% at the end of 2015. This was profitable since our direct investments outperformed funds during the past four years, at 15.9% compared to 10.9%.

In 2015, managers continued to implement a strategy based on a long-term philosophy. They invested $5.6 billion in private equities through several major transactions.

  • Bombardier Transportation: acquisition of a 30% stake of this global leader in rail transportation technologies (USD 1.5 billion);
  • O2: financing for the acquisition of O2 by Three UK , which contributed to the creation of the leading wireless operator in the United Kingdom (GBP 3.1 billion invested by the partners, for a 33% interest);
  • SPIE: additional equity invested in this company, which has become a European engineering leader (EUR 100 million); and
  • SterlingBackCheck: joint investment with Goldman Sachs to acquire a majority interest in this New York firm, which is one of the largest background screening companies in the world.

FACT SHEET - Québec

Through its actions, la Caisse contributes to the growth of strong Québec companies that can compete with the best in their industry and in world markets.

La Caisse builds long-term partnerships with these companies to have a genuine impact on their growth and help them create sustainable value by investing, for example, in innovation, modernization and acquisition initiatives. Among companies that la Caisse has partnered with for many years are CGI, Couche-Tard, SNC-Lavalin, CAE, Camso (Camoplast Solideal), Garda World, Héroux-Devtek and Groupe Germain.

With its in-depth knowledge of the Québec market and its international expertise, la Caisse is also able to undertake major real estate and infrastructure projects that benefit its clients and the Québec economy.

Through its many initiatives, la Caisse fosters the development of small, medium-sized and large companies, enables the implementation of impactful projects for Québec, and contributes to the creation of a new generation of Québec industry leaders through its promotion of entrepreneurship.

More specifically, the approach taken by la Caisse focuses on the following four areas:

  • Growth outside Québec and internationally
  • Innovation
  • Projects with impact
  • Entrepreneurial initiatives

Growth outside Québec and internationally

Building on its financing offer, its teams in Asia, Latin America, the United States, Europe and Australia, and partner networks around the world, la Caisse acts as a gateway for Québec companies seeking to expand into international markets, whether through acquisitions, opening subsidiaries abroad or tapping into new distribution markets.

La Caisse reinvested $62.5 million in WSP, a partner since 2011, to help finance the acquisition of a Canadian engineering consulting firm. Over the past five years, it has participated in WSP's acquisition strategy on four occasions. During this period, WSP's revenues quadrupled, climbing from $652 million in 2011 to $2.9 billion in 2014. 

A chart is available on the Caisse's website

La Caisse invested $5 million in D-BOX and established a connection with Ivanhoé Cambridge in Asia to facilitate the Québec company's entry into China. When la Caisse made its initial investment in the company in 2010, its revenues totalled $4.5 million, with just 56 movie theatres using its technology. Today, D-BOX revenues stand at $20.6 million, and its technology is installed in 401 theatres in 40 countries.

La Caisse invested $6 million in Fabritec alongside the Fonds Manufacturier Québécois to enable the company to purchase some of the most advanced equipment in the country and implement a new production line. Fabritec, a company that designs and manufactures kitchen cabinets and bathroom vanities, is in a phase of rapid expansion, notably in the United States, where its products are sold in more than 175 new sales outlets.

La Caisse also reinvested $150 million in Agropur, a leader in the Québec cooperative movement, to strengthen its position as one of North America's largest dairy processors. The transaction brings total Caisse investments in Agropur to $300 million.

Also in 2015, la Caisse partnered with HEC Montréal to create a new intensive training program for SME executives focused on international growth. The program aims to provide established Québec companies with the tools they need to plan, measure and enhance their business development abroad.

Innovation

In a world where competitiveness is tied to innovation, la Caisse expects to play a greater role in accelerating Québec companies' adaptation to the digital era. It is targeting innovative industries (technology, electric transportation, etc.), in addition to companies turning to innovation to increase their productivity and operational efficiency and better serve their markets.

In 2015, together with partners, it invested $80 million in Lightspeed, a Québec company specializing in cloud technology, to enable it to optimize its technological infrastructure and to further develop its eCommerce offering.

La Caisse also invested $15 million in XPND Croissance, a fund dedicated to sustainable transportation, technology, media and entertainment, in order to further the growth of these forward-looking sectors.

Projects with impact

CDPQ Infra, the new Caisse subsidiary, is studying two major Québec infrastructure projects identified as priorities: the electric public transit system on the new Champlain Bridge and the one linking downtown Montréal to Montréal-Trudeau International Airport and the West Island. A consultation process will be launched in the spring of 2016 in collaboration with municipal partners in the Montréal metropolitan region.

Ivanhoé Cambridge continues to implement its plan for downtown Montréal. In 2015, it established a partnership with Montréal firms for the creation of Au Sommet Place Ville Marie, a unique entertainment and dining destination. It also announced major renovations to transform Fairmont The Queen Elizabeth hotel, representing an investment estimated at more than $140 million.

Entrepreneurial initiatives

In 2015, for its 50th anniversary, la Caisse created Espace CDPQ, designed to bring together key stakeholders in the entrepreneurial ecosystem to foster innovation and globalization. Slated to open at Place Ville Marie in spring 2016, Espace CDPQ aims to promote the emergence of a new generation of innovative Québec entrepreneurs and help them position themselves successfully in world markets.

In addition, la Caisse, Desjardins Group and National Bank joined forces to launch "Devenir entrepreneur," an ambitious awareness program to encourage young people and their networks to consider entrepreneurship as a career option. The digital platform, created in collaboration with entrepreneurs from all regions, age groups and industries, provides new entrepreneurs with information, testimonials, tips as well as a directory of key resources. It also includes a toolbox for elementary and secondary school teachers.

Some figures

  • At the end of 2015, la Caisse, through its direct investments and specialized funds, was a partner of close to 550 SMEs in regions across Québec.
Over the past four years, its new commitments and investments in Québec total $11.2 billion, including $2.2 billion in 2015. Québec assets stand at $59.7 billion.

A chart is available on the Caisse's website

 

SOURCE Caisse de dépôt et placement du Québec

For further information: Maxime Chagnon, Senior Director, Media and Public Relations, + 514 847-5493, mchagnon@cdpq.com

RELATED LINKS
http://www.cdpq.com/

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