'Have to continue to protect that nest egg': AIMCo chair on Canadian pension model and the economy
Exposure to malls, office buildings and other sectors hit by the pandemic weighed on the performance of Caisse de Depot et Placement du Quebec last year, which returned 7.7 per cent thanks to investments in private credit and equity.
Net investment income for 2020 was $24.8 billion (US$19.8 billion), down from $31.1 billion a year earlier, the Montreal-based fund manager said Thursday. Net assets rose to $365.5 billion as of Dec. 31, from $340.1 billion at the end of 2019.
The results trailed the fund’s investment benchmark, which was up 9.2 per cent. At the same time, Caisse fared better than smaller peer Ontario Municipal Employees Retirement System, which lost 2.7 per cent in 2020, its worst result since the global financial crisis.
“It was difficult for anyone to be prepared for this crisis,” Chief Executive Officer Charles Emond told reporters. “Overall our portfolio was balanced enough to enable returns that meet depositors’ needs.”
Caisse’s worst performance came from its real-estate asset unit, Ivanhoe Cambridge. Plans to sell a string of malls announced a year ago were slowed down by the virus crisis, resulting in just one transaction in British Columbia.
In spite of investments in the booming logistics sector, the property portfolio posted a 16 per cent loss. President Nathalie Palladitcheff told reporters two more sales were underway, with malls now accounting for less than 20 per cent of the portfolio.
“Did we do all that we could, all we had to do?” Palladitcheff asked. “In the circumstances of this past year, my answer is an absolute yes.”
Private Equity Strength
Public and private equity returned 12.4 per cent, while fixed income climbed 9 per cent, with gains in private credit and rates. Infrastructure rose 5.1 per cent, a performance that would have been three percentage points higher if not for Caisse’s exposure to airport, which account for almost 10 per cent of the portfolio, Emond said.
The unprecedented pandemic environment was characterized by sharp contrasts between asset classes, with eight tech stocks -- including Facebook Inc. and Amazon.com Inc -- driving 70 per cent of the Standard & Poor’s 500 performance last year, Emond said. Caisse doesn’t own much of those stocks, but was helped by its private equity investments, in particular in tech companies that went public such as Nuvei Corp., he said.
“The pandemic shook the global economy in 2020, even further illustrating the disparity between market valuations and companies’ real growth,” Emond said in a statement. “The coming years will be challenging due to the ensuing economic consequences, extremely low interest rates and high valuations in multiple sectors.”
Caisse manages the pensions of retirees in Quebec, Canada’s second most populous province, as well as various provincial insurance plans. It said its weighted average annual return was 7.8 per cent and 8.6 per cent for five and 10 years, respectively.