Market turmoil hits the Caisse
Quebec’s US$303 billion pension manager has written off its stake in bankrupt cryptocurrency lender Celsius Network LLC, with its chief executive officer conceding the fund invested “too soon” in the sector.
Charles Emond, CEO of the Caisse de Depot et Placement du Quebec, spoke publicly for the first time Wednesday about the fund’s decision last year to invest US$150 million in Celsius. He described the crypto industry as a sector “in transition” but defended the work done by CDPQ’s staff.
“The due diligence was quite extensive with many experts and consultants involved. The team came in cautiously,” Emond said at a news conference in Montreal. “We had a 4 per cent equity stake. The conversations we had internally were pretty straightforward. The teams are accountable for that.”
Celsius filed for Chapter 11 bankruptcy in July, saying liabilities exceeded assets by more than US$1 billion after a crash in crypto prices. The company is trying to restructure and has received multiple offers of fresh cash, a lawyer for the crypto lender said Tuesday.
“Due diligence is not a guarantee of success,” Emond said, adding that he has “empathy” for the thousands of clients who’ve seen their funds frozen in the bankruptcy process.
Montreal-based Caisse de Depot reported a 7.9 per cent loss in the first six months of the year, which the firm said was better than the 10.5 per cent decline of a benchmark portfolio based on its asset mix. Net assets fell $28.2 billion to $391.6 billion (US$303 billion).
Its fixed income portfolio dropped 13.1 per cent as the bond market “turned in the worst performance since the 1920s,” Emond said. Public stocks and private equity suffered declines of 16 per cent and 2.4 per cent, respectively.
But strong returns in real estate and infrastructure helped offset those losses. Caisse’s property arm has been shuffling assets, reducing its exposure to Canadian shopping malls and adding residential, industrial and life-sciences buildings. The real estate holdings gained 10.2 per cent in the six months ended June 30.
Emond said investors had to navigate the worst half of the last 50 years. Inflation, interest rate hikes, fears of an economic downturn and the war in Ukraine were among the factors to explain the disappointing returns.
Ontario Teachers’ Pension Plan said this week it had a 1.2 per cent net return in the first six months of the year.