3.5% return for the Caisse in the first half of 2012 - Net assets total $165.7 billion, up $6.8 billion - 10.5% annualized return over three years

The Caisse de dépôt et placement du Québec provided an update today on its performance for the first half of 2012. For this period, it earned a 3.5% weighted average return on depositors’ funds. The Caisse’s net assets reached $165.7 billion as at June 30, 2012, up $6.8 billion from $159 billion as at December 31, 2011. Net investment results totalled $5.4 billion for the first half of the year and depositors made a net contribution of $1.4 billion.

Over a three-year period, the Caisse posted a 10.5% average annual return. All major asset classes had positive returns for this period, surpassing their benchmark indexes and contributing to the net investment results of $41.1 billion.

“Despite turbulent markets and a global economic downturn, the Caisse generated a positive return in the first half, in line with the long-term needs of its depositors,” stated Michael Sabia, President and Chief Executive Officer of the Caisse. “Over a longer period, during the last three years, we have taken a cautious approach in an often highly volatile economic and financial climate, while continuing to execute our strategic plan. Our average annual returns in excess of 10% in this period reflect solid results, given this climate. Conditions will remain unpredictable for some time. Therefore, we will continue to focus on our long-term objectives as we’re involved in a marathon, not a sprint.”

“How the markets evolve in the coming months will hinge on the uncertainty surrounding management of the European crisis, U.S. public finances and Chinese economic growth,” Mr. Sabia said. “As long as this uncertainty persists, it is difficult to foresee improved investor sentiment that could lead to a lasting recovery and lower volatility.”

HIGHLIGHTS

“Over the last six months, the Caisse carried out a number of major transactions in line with a strategy based on research and in-depth knowledge of investments. We continued to focus on tangible assets – those closely connected to the real economy – and promising companies that we know and understand well,” Mr. Sabia said. 

Key investments

A number of infrastructure investment decisions were made in the first half of the year, in particular: 

• the Caisse increased its equity interest to 30% in Keolis Group, one of Europe’s leading public transport operators, which the Caisse owns in partnership with SNCF; and
• in co-operation with Plenary Group, the Caisse also announced an investment in five public-private partnership projects in Australia, including the Melbourne Convention Centre ($145 million).

Ivanhoé Cambridge, the Caisse’s real estate subsidiary, announced several investments, including:

• the PSA Peugeot Citroën head office in Paris ($350 million);
• the River Point office tower in Chicago ($300 million);
• shopping centres in Brazil ($640 million); and
• increased holdings in four shopping centres in Canada ($510 million), including two in Québec ($225 million).

The Caisse was very active in financing Québec companies in the first half of 2012, with new investments totalling $1.6 billion.

In line with its strategy to serve as a bridge between Québec companies and global markets, the Caisse supported the international expansion of companies such as CGI ($1 billion) and GENIVAR ($100 million). The Caisse also invested in Laurentian Bank ($100 million) to help it expand across Canada and enabled Innergex ($100 million) to make acquisitions in Québec and British Columbia.

The Caisse made additional investments in some of its portfolio companies, including Camoplast Solideal, Garda, RONA and SSQ Financial Group. Furthermore, to stimulate the growth of small and medium-sized businesses and to support regional development, the Caisse:

• increased its investment capital for publicly traded small-cap companies by $150 million; and
• continued to invest as part of our partnership with Desjardins Group, bringing total investments to almost $230 million over the last three years in more than 90 companies.

Risk management and financial stability

The Caisse’s overall portfolio liquidity, totalling close to $44 billion, remained very robust. The overall risk of the Caisse’s portfolio was substantially unchanged from December 31, 2011. Furthermore, the Caisse made significant progress with respect to counterparty and credit risk.

Cost control

Operating expenses and external management fees are consistent with forecasts and remain unchanged from 2011 (less than 20 cents per $100 of assets under management), reflecting the Caisse's highly efficient management, which compares advantageously with its peers.

RETURNS

“The first six months of the year were marked by the European crisis and the recession in that region,” said Roland Lescure, Executive Vice-President and Chief Investment Officer of the Caisse. “Amid the uncertainty surrounding the global economy, investors turned to safe havens, putting downward pressure on Canadian, German and U.S. interest rates.”

“In a half-year period characterized by high volatility in all equity markets, the Canadian stock market was adversely affected by lower commodity prices. Despite this difficult context, we were able to earn a positive return on all our asset classes, with targeted strategies, astute security selection, diversification and ongoing risk management,” Mr. Lescure added.

Net investment results

The net investment results for the first half of the year were earned primarily by the Equity portfolios, which generated $3 billion of the $5.4 billion. Fixed Income, particularly the Bond and Real Estate Debt portfolios, produced an additional $1.2 billion. Over three years, all asset classes contributed substantially to the net investment results of $41.1 billion.

Returns as at June 30, 2012

(1) The total includes ABTN, Hedge Funds, Asset Allocation, Overlay Strategies and cash management activities of individual funds.

For the first half of the year, the Caisse’s return was 3.5% versus 3.7% for its benchmark portfolio. The Private Equity and Real Estate portfolios underperformed their respective benchmark indexes during the six-month period. Equity portfolios posted overall results that are in line with their benchmark indexes. Moreover, the Bond and Real Estate Debt portfolios outperformed their benchmarks during the period.

Over three years, the Caisse earned a 10.5% average annual return, versus an 8.9% return for the benchmark portfolio. The 1.6% positive difference is due mainly to the Private Equity, Infrastructure, Bond and Real Estate Debt portfolios.

Asset allocation

As at June 30, 2012, the Equity asset class represented about 47% of the overall portfolio, with 37% in publicly traded securities and 10% in private equity. The Fixed Income and Inflation-Sensitive Investment asset classes, which are much less sensitive to market fluctuations, represented 37% and 14% of the portfolio, respectively.

ABOUT THE CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC

The Caisse de dépôt et placement du Québec is a financial institution that manages funds primarily for public and private pension and insurance plans. As at December 31, 2011, it held $159 billion of net assets. As one of Canada’s leading institutional fund managers, the Caisse invests in major financial markets, private equity and real estate.

For more information: www.cdpq.com.

The Caisse has also included with this press release the summer 2012 analysis of the global economic outlook (PDF)