MONTRÉAL, Aug. 11, 2017 /CNW Telbec/ - Today, Caisse de dépôt et placement du Québec presented an update of its performance as at June 30, 2017. Over five years, the weighted average annual return on clients' funds reached 10.6%, representing net investment results of $107.9 billion, bringing la Caisse's net assets to $286.5 billion. Compared to its benchmark portfolio, the investment strategies of la Caisse generated $13.5 billion of value added. For the first six months of 2017, the average return on clients' funds was 5.0%, generating close to $800 million of value added.
Caisse overall return vs. benchmark portfolio
"In the first half of 2017, global equity markets continued producing good returns, while both volatility levels and interest rates remained low. In other words, it was an environment not all that different from what we've seen in recent years. That said, the weak performance of the Canadian stock market this year contrasts with its strong returns last year and with those of major markets abroad," said Michael Sabia, President and Chief Executive Officer of la Caisse.
"Looking ahead, a key question is the future of monetary policy. There appears to be an emerging bias among central banks in favour of tightening monetary conditions. However, it remains to be seen whether these actions will be relatively modest and short-term or more substantial and sustained over a longer period. These scenarios are likely to have quite different consequences for market performance and economic growth."
HIGHLIGHTS OF THE ACCOMPLISHMENTS
Faced with increased competition in the markets, la Caisse pursued its strategy of diversifying its sources of returns.
In its Fixed Income portfolio, la Caisse expanded its credit operations in order to gain exposure to market segments offering attractive risk-return profiles. As such, la Caisse entered the specialty finance market by announcing the creation of a USD 2-billion aircraft leasing and financing platform with GE Capital Aviation Services, a world leader in the sector. La Caisse also invested $1.9 billion in SNC-Lavalin − $1.5 billion of which was through debt − to support the company's acquisition of United Kingdom-based WS Atkins. This financing is in line with la Caisse's strategy in Québec and is distinct from traditional corporate credit in that it is secured by SNC-Lavalin's interest in the Highway 407 ETR project.
In addition to SNC-Lavalin, over the past few months la Caisse continued to support the global expansion of other Québec companies such as Osisko, during the company's acquisition of Orion Mine Finance's royalty portfolio, and Cogeco, whose American subsidiary made an acquisition in the United States. Adding to its investments in the new economy, la Caisse supported eStruxture in the company's creation of a Montréal-based, cross-Canada platform of cloud-computing data centres.
In Private Equity, la Caisse continued to work with world-class partners, including through our investment, with KKR, in USI, an American insurance brokerage firm specialized in SME services. La Caisse also expanded its investments in the FinTech sector by purchasing an equity stake in AvidXchange, a leading provider of accounts payable and payment automation for midsize companies.
In Real Estate, Ivanhoé Cambridge, a subsidiary of la Caisse, bolstered its presence in the American industrial sector by acquiring Evergreen Industrial Properties, which owns and operates a portfolio of over 150 properties in 18 cities. This high-growth sector supports e-commerce, distribution and light manufacturing companies. As well, Ivanhoé Cambridge and its partner Hines began the construction of CIBC Square project, the bank's new world headquarters on Bay Street in downtown Toronto. In Paris XIIIe arrondissement, Ivanhoé Cambridge also broke ground on DUO, the future headquarters of Natixis bank.
Finally, several key steps were completed in the Réseau électrique métropolitain (REM) project led by CDPQ Infra, a subsidiary of la Caisse. The Québec and Canadian governments both confirmed their financial support, demonstrating their commitment to this major $6.04-billion electric public transit project. This finalized the financing package for the REM, in which la Caisse has committed to invest $2.7 billion.
As at June 30, 2017, clients' net assets totalled $286.5 billion, up $15.8 billion from $270.7 billion at December 31, 2016. This growth is attributable to net investment results of $13.3 billion, in addition to net deposits of $2.5 billion.
For the half-year ended June 30, 2017, la Caisse generated a 5.0% return, compared to 4.8% for its benchmark portfolio.
Over the period, the returns of la Caisse's eight largest clients varied between 5.8% and 4.3%, depending on their investment policies.
Returns by asset class and performance in relation to the benchmark index
A chart is available on the Caisse's website
Over five years, la Caisse's annualized return was 10.6%, outperforming its benchmark portfolio, which stood at 9.3%. This difference generated $13.5 billion of value added.
Over the period, the annualized returns of la Caisse's eight largest clients varied between 11.9% and 9.1%.
The Fixed Income asset class generated an annualized return of 3.9%, driven mostly by current yield and a drop in credit spreads. This asset class generated more than $2.4 billion of value added over its benchmark index, attributable mainly to solid corporate bond returns. Among Real Assets, the Real Estate and Infrastructure portfolios together posted a return of 11.7% due to high current yields and the assets' strong operating performance. The Equity asset class returned 14.5%, considerably higher than its benchmark index, which stood at 12.6%. The active selection of high-quality securities in equity markets and a large exposure to the United States were major contributors to this return. Of the $9.7 billion of value added generated by the Equity asset class, $7.5 billion was derived from public equities and $2.2 billion from the Private Equity portfolio. Overall, la Caisse's increased exposure to global markets was profitable for all asset classes over the five-year period.
Over six months, with little movement in the bond markets and rates staying close to their historic lows, the Fixed Income asset class posted a 2.7% return and net investment results of $2.5 billion. In Real Assets, the Real Estate and Infrastructure portfolios posted a 3.6% return and net investment results of $1.6 billion. The Equity asset class generated a 6.7% return and net investment results of $8.6 billion, of which $2.4 billion are attributable to the Global Quality mandate, which is a pillar of la Caisse's absolute-return management strategy in its public equity portfolio. In the first half of the year, Canadian equities had the weakest performance among the developed markets, whereas emerging markets posted the highest returns, driven mostly by strong growth in the major Asian economies.
The liquidity of la Caisse's overall portfolio remains robust. This liquidity allows la Caisse to meet potential commitments and contingencies, and gives the institution the necessary agility to take advantage of market opportunities.
Annualized operating expenses stood at 22.6 cents per $100 of average net assets, a level which compares favourably to that of its industry.
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 June 30, 2017, it held $286.5 billion in net assets. As one of Canada's leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.
SOURCE Caisse de dépôt et placement du Québec
For further information: Maxime Chagnon, Senior Director, Media and Public Relations, + 1 514 847 5493, [email protected]