Mid-year update - La Caisse posts a five-year annualized return of 10.6% and a six-month return of 5.0%

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

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.

PERFORMANCE HIGHLIGHTS

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

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.

FINANCIAL REPORTING

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.